The issuing bank which issues a credit card has naturally to cover its cost of operations. The issuing bank recovers basically joining fee as well as the annual fee to cover the cost of issuing a card and extending its services. Apart from this, the issuing bank levies certain credit card charges to recover its operational cost and recovers interest to cover its cost of funds and the risk undertaken in this type of business.
Credit Card Charges
The different types of charges levied on credit card customers are as follows:
- Joining Fee
- Renewal fee/annual fee: The credit card issuer bank charges an annual fee for providing a credit card. The annual fee may vary from Rs 100 to Rs 3000 based on the type of the credit card. Not all credit cards have an annual fee. You can expect an annual fee on most secured credit cards, some premium credit cards, charge cards, and subprime credit cards.
- Cash advance transaction fee: The credit card issuer bank charges transaction fee whenever you withdraw money from the ATM. Usually, it varies from Rs 100 per transaction to 5% of the transaction value. This fee varies from issuer to issuer.
- Return of cheque charges: A returned check fee or returned payment fee is charged when your bank returns your credit card payment, for example when there’s not enough money in your account to cover the payment. The returned check fee can be from Rs 350 to Rs 3000 based on the transaction value and varies from issuer to issuer.
- Auto debit return fee: Auto-debit is a facility where the customer’s bank account is linked to his credit card account. If the customer fails to pay the amount by the due date, then the credit card issuer automatically debits the customer’s account for that amount. The issuer may charge a small amount of fee for this transaction.
- Card upgradation fee – The bank may charge a small fee around 300 to 500 to increase the credit limit or to upgrade the credit. Fee banks may offer this service for free for selected customers.
- Late payment charges – Usually the bank charges from Rs 350 to Rs 550 depending on the outstanding balance. Bank charges this amount if you fail to pay credit card bill on time.
- Over limit charges
- Add on fee (Supplementary card fee – if exists)
- Finance charges (Interest on the outstanding amount/overdue)
- Interest on cash advances (example: Cash withdrawals from ATM)
- Fee on cash payment at branches
- Outstation cheque processing fee
- Duplicate statement request fee
- Card replacement fee
- Cheque/cash pick up fee
- Charge slip request fee (per charge slip)
- Petrol transaction charge for use of the card at the petrol pump
- Reward redemption fee – per redemption
- Railway ticket purchase fee – Usually 1.8% to 2.5% of transaction amount + tax
- Foreign currency transaction request – A foreign transaction fee is a charge of 1% to 3% added onto purchases made on foreign currency.
- Transaction fee for payment of customs duty
- Fees for getting a copy of credit information report
- Card blocking fee
- Limit enhancement fee (if it is beyond 3 months)
- Service Tax
The charges listed above differ from the issuer to issuer and all of them may not be levied by all. As per the guidelines in force, all the charges which would be levied by a credit card issuing bank/NBFC are required to be prominently mentioned in the most important terms and conditions. These conditions should be displayed on the website. The banks should also send a printed copy of these conditions to the cardholder along with the card.