Mumbai: Post demonetisation, transactions are shifting to cards and other means of digital transactions. According to provisional data released by the Reserve Bank of India, debit and credit card transaction volume jumped about 43% while the value of those transactions grew 40% from between November and December 2016.

With 27.3 million credit card holders in India (as of October 2016), a credit card is one of the preferred modes of payment, at least for the urban mass affluent. But like everything good, there is a cost to holding a card. Here is a look at the various costs around a credit card. Remember that costs can vary across card issuing companies.

Joining fee and annual fee: To own a credit card, you need to pay an initial cost. Banks usually charge a joining fee followed by an annual fee, though some card issuing companies may offer cards free of cost. The joining fee usually starts from Rs200 and can go up to Rs25,000. The annual fee ranges between Rs299 and Rs8,000. As a promotional offer sometimes the card issuing company waives off all charges for a year. Watch out for charges beginning in year two.

Cost of late payment and paying the minimum due: If you don’t pay your credit card bills on time, you will have to pay interest on your bill amount. Generally, interest rates on credit cards are in the range of 22-48% per annum. So, if your outstanding is Rs10,000 on a credit card and the monthly interest rate is 3.25% (39% annually), and you miss the payment deadline, you pay one tenth of the amount you borrowed in various fees.

Also read: Card payment at petrol pumps: What’s the fuss about?

A late payment fee of Rs500 (this varies bank to bank) and a service tax of 15% of the interest, which in this case is Rs534.25, you end up paying Rs1,114 in all as a penalty. If you do not pay in the second month, the costs just keep escalating. Late payment charges can go up to Rs750 per bill and varies depending on the amount and card issuing company. If you lose your card, the bank will reissue a card if the earlier one was lost, stolen or damaged, usually for around Rs100.

Credit limit and cash withdrawal fee: All credit cards come with credit limits. If you spend in excess of your credit limit, you will be charged a penalty of around 2.5% of the excess amount. Besides the charges, it also has an impact on your credit score. If you withdraw cash using your credit card you have to pay a cash advance fee, which is usually 2.5% of the amount that you withdraw.

Mode of payment: You also have to pay attention on how you make your bill payments. If you pay by cash at a bank branch or at the ATM, you will have to pay a cash processing fee of around Rs100. If you use an outstation cheque, you have to pay a processing charge of Rs25-100 depending on the cheque value and the card issuing company. The best way to pay the bills is paying online through net-banking or mobile banking as no charges are imposed.

Merchant charges: When you swipe a credit card on a point of sale terminal, the merchant is supposed to pay a charge to three stakeholders—the bank that has installed the terminal, the card network such as Visa and MasterCard and the card issuing company. Some merchants pass on this cost to the consumer in the form of a surcharge or an additional cost ranging from 0.75%-2.5%. These costs are not supposed to be levied from the consumer; it is the merchants who have to pay the cost.

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