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What is a Credit Card & Their Annual Charges?

With as many as almost 50 million active credit cards as of May 2019 reported by Economic Times, the rising popularity of credit cards is no news for consumers. Even with such a huge number of active credit cards in India, many individuals are devoid of the information pertaining to the benefits associated with credit cards, its usage, and annual charges implied on it.

Credit cards are debt-based financial tools which require. There are certain credit card charges applicable that the user may have to pay to continue using their card. A clear idea on these charges is helpful for consumers as it creates the much-needed transparency in the process.

What is a credit card?

It is a payment card issued by financial institutions to consumers so that they can make payments for the purchase of products or services online or offline at various merchant terminals. While making payments using a credit card, it is the credit card issuer who pays on behalf of the user. The payment made is added to the credit utilised which the user is liable to repay within the due date as mentioned in the credit card monthly statement.

This billing period is usually 30 days and all transactions or purchases made during the entire billing cycle are included in the bill. For the ease of payment, consumers are additionally provided with a 15 to 30 day extra period, known as grace period.

Every credit card user needs to make bill payments within the grace period so that they don’t have to pay late payment charges or to avoid incurring interest on the unutilised amount. Therefore, consumers availing credit cards must be well-versed about how to pay credit card bills so that they don’t make any mistakes.

Apart from the late payment charges in case of delay in payment, other fixed credit card charges like annual charges are imposed on credit cards.

What are the annual charges of credit cards?

Financial institutions impose some annual fees on credit cards that users need to pay. This fee is usually fixed by financial institutions and is applied for premium cards that offer multiple benefits to users. Cards like Bajaj Finserv RBL Bank SuperCard offer multiple benefits like cashbacks, rewards, welcome bonus, discount, etc. and hence impose minimal annual charges that user needs to pay.

Such credit card charges are usually applied at the end of the year, or beginning or distributed partially for the convenience of the consumer. Furthermore, candidates applying for such credit cards must make sure that the offered benefits are always greater than the annual fee charged so that they are always on the profitable end.

In case the credit card lender decides to make changes in the annual fee, they have to notify the candidate about the same 45 days prior. Therefore, candidates availing Platinum Plus Supercard features and benefits and other such cards must make sure that they claim more benefits than they have to pay as annual charges.

Apart from the annual charges, credit card swipe charges may be imposed by merchants for every credit card transactions made online or at POS terminals. These charges are usually 1% to 3% of the payment made.

Subsequently, financial companies may include few other credit card charges on an applicants’ bill such as –

  • Late payment fee.
  • Returned payment fees.
  • Overlimit fee.
  • Balance transfer fees.
  • Cash advance fees.

Even though the annual fee is compulsory with certain premium cards, paying these other fees can be avoided by the user if they know how to use a credit card wisely. Utilizing credit cards gets easier with well-informed knowledge of annual fees and other charges.

Therefore, candidates can easily avail a credit card as offered by lending institutions but should first get familiar with the annual fee imposed and other charges for better financial planning.

Summary

Credit card and its annual charges to know about

Credit cards are one of the constantly growing payment options that users have accepted because of its universal acceptance and numerous benefits. This payment card is offered by financial companies to provide candidates with a line of credit that can be utilized to meet any day to day expenses, medical emergencies, educational expenses, or lifestyle spends.

However, these cards come along with credit card charges that are additional expenses applicable as per terms against the credit provided by the issuer. It is essential for prospective credit card users to know about these charges so that they can better plan their finances better while experiencing a transparent credit procedure.

Since credit cards allow users to make payments for their spending and pay it later, it is a convenient payment option for several users that require access to emergency cash. Credit cards offer benefits like –

  • Welcome bonus.
  • Cashbacks and rewards.
  • Interest free cash withdrawal from ATMs.
  • Emergency personal loan.
  • Protection against fraudulent transactions etc.

Subsequently, candidates must make timely bill payments in full to make sure they acquire these benefits offered by financial companies. These are the benefits that a premium card user can easily acquire and hence one should compare and see whether the annual charges implied is less than the savings or monetary benefits they are acquiring using it.

Annual fee imposed on a credit card is determined by the financial company. There are several other fees and charges that users may have to pay such as balance transfer fees, late payment charges, overlimit fees, etc. Users who are well-versed with the intricacies of credit card and the associated charges like annual fee can avail the maximum benefits out of it with ease.