9 Types Of Credit Card Charges You Must Know About


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Credit cards provide convenience, but if you don’t use it the right way, you may be losing out without realising it. Here are 9 fees and charges that you must know to avoid being charged unnecessarily when using a credit card.

 9 Credit Card Charges & Fees:

1. Cash advance fees

Some credit cards offer cash advance to the cardholder. This feature allows you to withdraw cash from ATMs or over the counter using your credit card. The cash is then deducted from your credit limit or funds on deposits, and are subject to a certain limit.

However, cardholders should think of cash advance as a very expensive loan. This is because there are many charges incurred when you use a cash advance. First, the interest charge will begin from the day of cash advance withdrawal until you have paid it back in full. Most of the time, the interest charge rate is 18%, the maximum chargeable interest rate. Remember, this is the interest rate that will be charged daily on the remaining balance of your cash advance debt! On top of the hefty daily interest rate, you will also be charged a one-time fee for taking cash advance.

See also: Personal Loan or Cash Advance: Which is better?

 2. International ATM withdrawal

Withdrawing money from an ATM overseas will incur withdrawal fee and a foreign exchange fee per transaction. These charges and their exact amounts should be listed in your bank’s terms and conditions. You have to make sure that your card supports the Cirrus or PLUS network as this will enable you to take out money from your account no matter which country you are at. The charge for international ATM withdrawal range between RM8 – RM12. For example, Hong Leong Bank charges RM12.72 for international ATM withdrawal via both Cirrus and Plus network.

Another thing to take note of withdrawals at ATM when you are abroad is to avoid converting it on the spot. Some ATM may present dynamic currency conversion on ATM withdrawals by offering you the option of converting to your country currency. You should choose to proceed without conversion.

More in-depth explanation of DCC below.

3. Dynamic Currency Conversion (DCC)

One of the many reasons people use credit cards is the convenience that it provides, especially when travelling overseas. Instead of having to change a large amount of currency and carrying cash as you travel, paying for your purchases with a credit card is easier and can actually help you save money

But to make sure you save money instead of being charged more, you must understand how Dynamic Currency Conversion (DCC) works. DCC gives you the option to select the currency when paying for your purchase when you are abroad, either the country’s local currency or your home currency.

For example, you’re in London and paying for your hotel stay with your credit card. You will then be asked if you would like to pay for it in GB Pounds or in Ringgit (RM). If you choose to pay in RM, thinking it would be the better and cheaper way to go, you have made a mistake.

It’s best to pay in the local currency of the country you’re in. If you choose to pay in RM, you would be getting a bad deal for the exchange rate because it would go through a foreign bank, and you may also have to pay extra fees and administration cost for some banks.

Tip: If you are unsure of the fees or charges that will be involved when using your credit card overseas, call your bank and ask about the specific fees for overseas spending.

4. Foreign transaction fees

A foreign transaction fee is charged by credit card issuers on each transaction made abroad. Credit card holders are typically charged foreign transaction fees when they purchase items while overseas or when they make purchases that use an overseas bank to process the transaction. Foreign transaction fees will vary between credit card issuing banks, but the charge is usually about 1 to 3% of the total of each foreign transaction done.

If you are not sure whether your credit card will charge a fee for foreign purchases, check the card’s terms and conditions or contact your credit card issuing bank.

5. Interest rates

One of the most important charge when it comes to using credit card is the interest rate. All credit cards charge interest rate. However, there is a common misconception about credit cards that interest is charged whenever you pay with your card.

In reality, you will only be charged for keeping an outstanding balance on your account after the interest free grace period. From the time the statement is issued to the payment due date, any new purchases will not be charged with an interest rate. This is known as a grace period.

To enjoy 0% interest charges, pay the balance in full before or on the due date. Most banks have a grace period of 20 days from the statement date, but to be sure, you should check your credit card’s terms and conditions.If you pay your bills in full and on time, you won’t have to pay any interest at all. But do take note that your interest rate can change, with little or even no notice. This is usually as a result of late payment which then causes you to be charged the highest interest rate of 18%.

6. Late payment charge

This is a charge for credit cardholders who make late payments on their credit card balance. For example, if the minimum payment is not made by the payment due date, a late payment charge will be imposed at 1% of the unpaid outstanding balance, subject to a minimum of RM10, whichever is higher up to a maximum of RM100.

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7. Annual fees

An annual fee is also known as a maintenance fee that is charged annually by your credit card provider. Some banks will waive off annual fees depending on cards and promotions. Credit cards with annual fees are usually cards that offer extra benefits and perks such as. Annual fee can range between RM80 up to RM626 for premium credit cards.

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8. Card replacement fee

If you lose, damaged or your credit card was stolen, you will be charged for a replacement credit card. The charge differs between banks, for example Maybank and Citibank charges RM50, while Ambank charges RM25 for credit card replacement.

9. Goods & Services Tax (GST)

As of 1st April 2015, the government began the 6% GST charge in the country on goods and services, with the exception of a limited amount of basic necessities. With that, the annual fees of credit cards are also subjected to GST. Previously, credit card holders were charged service tax, however, after the implementation of GST, the RM50 service tax was removed. GST will only be charged on annual fee of a credit card, but not on late payment charges and other finance charges.

Make sure you are aware of all the charges that can incur when using a credit card as mentioned above. This way, you can ensure you can avoid the charges such as late payment charges, expensive interest rate, and dynamic currency conversion by being a smart and responsible credit card user.

See also: 4 Credit Card Facts You Probably Didn’t Know

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