Credit cards are increasingly being used more often and has become a currency of its own. From merchants preferring credit cards for its universal acceptance to customers opting for credit cards for the various perks and benefits it offers not to mention the convenience of ‘swipe now, pay later’, credit cards form a major chunk of daily transactions. But how many times one come has across a different monthly statement than what was expected. It may be a few Ringgit more which is why the discrepancy may go undetected but there is a reason that this happens.
The hidden charges that go with credit cards and its usage add to the monthly statements and can sneak up one a cardholder when they’re least expecting it. Some of these charges may be known but are still considered hidden charges because more often than not cardholders tend to forget these charges whilst concentrating on interest rates charged by the card. Below are the hidden charges.
Credit Card Late Payment Fee:
The payment date that has been given is not to be used as a marker or milestone to guide a cardholder to make payments. The minimum payment to be made must be done so within the due date and any delay is making the payments attract a late penalty fee. The amount levied as penalty varies from bank to bank. Not only do late penalties increase the total amount but failure to make this payment two months consecutively will result in cardholder being brandished as a defaulter. Not only will this rove disastrous for credit rating of a cardholder but the bank will assign a risk score against the cardholder and stop the card from carrying out ay transactions
Banks provide an option of paying a minimum monthly amount and carrying over the balance to the next month. Cardholders often opt for this in order to make as small a payment without getting penalised but what they don’t realise is that the balance being carried over attracts an interest on that amount. Paying a minimum amount and carrying over a balance will not only lead to the cardholder taking longer to clear their bills but also adds to the amount of interest they end up paying during that time. More over there is another catch that people often miss. The balance that gets carried over from month to month doesn’t allow for the cardholder to make any new purchases which have an interest free period.
This type of hidden charges do not occur that often but when they do they carry a whole barrage of charges with them. If a cheque for payment bounces, then the cardholder will have to pay a fee for dishonoured cheques. If the cheque bonces very close to the payment date then the cardholder will have to bear the dishonoured cheque fees, a late payment penalty for missing payments and a monthly interest on the amount that is outstanding.
Exceeding Credit Limit:
a cardholder is assigned a credit limit at the time of availing a credit card this assigned credit limit is calculated based of the income profile of the cardholder. Cardholders can spend within their credit limit and will not be charged any extra amount but when cardholders exceed their credit limit, the excess amount can be charged with an additional interest of up to 5%.
these programs are attractive leverage points that are often used to sell credit cards to customers. They allow cardholders to transfer pending or outstanding credit card dues from one card to another at low and sometimes even zero interest to help manage debt but that most people don’t realise is that the zero interest period is short lived. More often than not, the tenure for such plans are three months. Cardholders who have not paid off the outstanding amount within this timeframe will have to pay the normal interest rate on any outstanding amount after the end of the tenure.
Credit not Debit:
Another charge which is often burdened onto the cardholder due to negligent usage of the card is withdrawal charges. Credit cards are not meant to be used as debit cards. They should not be used for withdrawal of cash unless it is a dire circumstance. Cash withdrawals not only incur the regular interest rate of 2.95% but every withdrawal incurs a withdrawal fee which ranges from 2 to 2.5% of the withdrawn amount. This fee only increases when withdrawals are done at ATM’s that does not belong to the bank which the credit card is from. The cash withdrawals on credit cards have no interest free period to pay it back in which means the interest begins to get calculated the minute the amount has been withdrawn.
For those people who decide that they’d rather just hide their card and not spend it for anything ever again, this fee can throw a wrench in their plans. Cardholders will have to intimate the bank about the fact that they would not be using the card anymore otherwise the annual charges will be charged onto the card and since cardholders are not using this card they often forget about the fees and forget to pay it. The cards not only have annual fees but failure to pay these fees on time will attract late payment penalties which would result in higher bills.
Credit cards may have a whole barrage of charges that go with their every action but their growing popularity is proof of their convenience and with proper management, a credit card can work for the cardholder and not against them.