Hidden Fees: Unveiling the True Cost of Credit Cards

Credit cards are helpful in accessing money we cannot afford at specific times. We can repay later with interest to avoid debts. But do we know the actual cost of using a credit card? Hidden costs of credit cards can be a burden on us and can have a negative influence on our financial stability. It is important to have a clear understanding of the true cost of credit cards to avoid trouble in the future, such as defaulting on payments and landing debts. Delayed or missed payments often impact our CIBIL score. 

Tip: You must check CIBIL score using the CIBIL score app to monitor your creditworthiness. 

In this article, we will cover the hidden costs of credit cards and provide assistance in managing them.

Understanding Credit Card

Banks offer a financial facility called a credit card, allowing individuals to access money up to a certain limit to fulfill their financial needs. Here, individuals get time to repay the debt and maintain their financial stability. The bank charges a certain rate of interest on the debt, which is to be repaid at a scheduled time. The term and interest rate imposed on a credit card completely relies on an individual’s creditworthiness, income, and credit history. 

True Cost Of Credit Cards You Must Be Aware Of

Here are some true costs of credit cards you must know before applying for a credit card.

Annual Maintenance Cost

Banks commonly refer to it as an annual fee and charge it once a year. However, some banks waive the annual maintenance cost on credit cards either for a lifetime or for a certain term.  

Individuals need to clarify whether their card is free with an annual fee for the first year or for a certain period, and then they must start paying the charges. Opting for credit cards offering no annual fee charges for a lifetime is advisable.

Cash Advance Fee

Based on an individual’s credit limit, they can withdraw a limited amount using credit cards. The cash advance transaction or cash withdrawal is costly and can incur a cash advance fee of up to 2.5% of the total amount withdrawn from an ATM using a credit card. Additionally, an interest starts accruing from the day the cash is withdrawn. It differs from using the card to purchase, where you are given time without these extra fees.

Over-Limit Fee

The credit card issuer can charge individuals with over-limit fees if they exceed a certain limit when accessing credit card money. These fees are also known as Exceeding Fees. Different lenders provide different limits and charge a heft-over-limit fee. Generally, the over-limit fee is a minimum of INR 500, but the charge may vary with the amount of the exceeding limit. 

Late Payment Charges

If individuals fail to repay their debts on time, it will lead to late payment charges. The fee varies with different lenders. Furthermore, late payment fees also have an influence on your creditworthiness, which will lead to problems in getting funds and expensive interest rates. Late payment charge is evaluated based on the individual’s statement balance.

However, banks also offer a minimum amount to pay on time. If you do not pay your dues, credit card companies can impose charges on the total amount and interest rates. It is advisable to keep track of payment dates to avoid delays and late payment fees. Failure to meet payment deadlines can result in credit card companies reporting this on your credit report. Do check the CIBIL score on the CIBIL score app to find a downfall in the score and take measures to improve it.

Foreign Currency Mark-Up Fee

Banks advertise that they accept their credit cards internationally, and you will never face problems in foreign transactions. However, they do not disclose a cost, which is called a foreign currency mark-up fee. The fee is levied in a percentage of an individual’s transaction amount. The fee varies with different credit cards. It is advisable to check the percentage of bank charges for foreign currency mark-up fees before applying for a credit card.

Goods and services tax (GST)

The charge is applicable to all credit cards. The standard GST rate applicable to financial services and banking is 18%. The fee is imposed by the government of India. 


When an individual pays for certain amenities such as petrol, tickets, and so on using a credit card, they will be charged with additional charges called surcharge. If you do not keep updates on your due bills and repayment dates, you may end up stuck in higher debts. Always check cibil score to avoid trouble in borrowing money from the bank in the future.


Credit cards provide convenience and flexibility for financial stability. However, individuals must know the hidden costs of using credit cards that can inflate their costs. Knowing about interest rates, over-limit fees, annual fees, foreign transaction charges, and so on can aid you with informed decisions while using credit cards. To avoid getting stuck in such fees and higher debts, you must read the terms and conditions, manage your expenditures, repay on time, read the fine print, and so on. 


Q1. Do interest rates vary with different transactions using credit cards?

Yes. Different transactions carry different interest rates. For example, the interest rate of goods and services purchased may vary from the interest rate of money transfers or cash advances.

Q2. Is it worth having a credit card despite numerous hidden charges?

The credit card offers convenience on your purchase in case of need. Furthermore, it aids in building creditworthiness if the repayments are on scheduled times, which offers leverage on borrowing amount, term, and interest rates.

Q3. How can over-limit fees be prevented?

Track your expenses so that they will not exceed the limit to prevent over-limit fees. Banks also provide alert notifications on reaching the limit range, which will help you to get an alert on approaching your credit card limit.

Q4. How to know about the hidden cost of a credit card?

To unveil the hidden cost of your credit card, you must read the terms and conditions thoroughly while applying for your credit card.


Bucky Robert

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