First-time credit card users must be aware of these charges

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Credit card is a very useful tool if it used judiciously. However, they have multiple drawbacks too if used recklessly. Credit cards also have multiple charges some of which are well known and some of which are not so widely known. But one has to pay those charges. So before opting for a credit card one must know and understand the charges. Experts suggest these little-known charges need to be understood to avoid any penalties. There are six different charges generally paid by the customers. Here is a brief information.

1) Annual charge

Credit cards come with a joining fee and annual fee. Even if you are offered a credit card for free, there will be annual free for sure. Please check it before opting for a new one.

2) Late payment charge

Banks levy additional late payment charges in case an individual does not pay the minimum due amount in time. These charges are applicable after the due date.

3) Interest charge

Normally banks charge around 35%-40% annual fee on the outstanding amount, which is quite high. After the interest free period banks generally charge the interest. So always remember the last payment date and make the payment before that date.

4) Cash handling charge

Credit card holders may withdraw money from the ATMs. Such transactions come with additional charges. Around 2.5%-3% cash withdrawn is charged. So try not to withdraw cash by using your credit card.

5) GST

As per the government rule, all credit card transactions are come under purview of GST. Currently the charge is 18% upon the billed value.

6) Overdraft charge

Overdraft charges are applied when a credit card holder exceeds their monthly credit limit applicable on the card.

Expert view

Credit cards generally come with multiple charges which are a bit high. If it is used judiciously, it can be extremely useful. But injudicious use of credit cards can land one in a debt trap.

“It is always advisable to go through all the detailed charges before opting for a credit card. Otherwise, one may land into a debt trap. Always cross check all charges before opting a credit card,” said Nilotpal Banerjee, a personal finance expert.