The hidden charges on credit cards that you must watch out for

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Annual and renewal fees

Several credit cards come with annual or renewal fees that are often not revealed at the time of application. While some cards offer "free for life", there are others that waive the first year's fee but charge from the second year on. The fees vary depending on the type of the card and benefits attached. It is important to understand whether the rewards or cashback reward are of more value to you than the fee that you are paying to get them.

Late charges

Not paying your credit card bill by the due date may levy heavy late charges that can quickly add up over a period of months. Paying even the minimum due amount will still roll over the balance along with additional interest. To avoid this, make sure you put reminders for yourself to pay the bill or use an auto-pay facility to pay in time so that your credit score remains good.

Revolving credit interest charges

If you do not pay your whole outstanding balance, the remaining amount is charged with high interest, typically 30 to 45 percent annually. The majority of cardholders think interest is only applied towards the pending amount, but in most situations, it is also applied towards new purchases until you settle the full amount. This can quickly put you in a debt cycle if you don’t manage it properly.

Cash withdrawal fees

The costliest mistake you can make is to take a cash loan against a cash withdrawal via a credit card. Apart from a transaction fee of around 2 to 3 percent of the withdrawn amount, interest starts accumulating at once without any relaxation period. Hence, even small cash withdrawal can be a very expensive affair if not repaid on time.

Forex transaction and conversion fees

Using your credit card while traveling overseas or for foreign online purchases attracts foreign currency conversion fees, typically 2 to 3.5 percent of the transaction amount. Some high-end cards have a lower or no conversion cost, but to most of you, this expense adds up considerably, particularly while traveling or purchasing large items.

Over-limit and card replacement charges

If your spending is over the limit, the issuer might approve the purchase but charge an over-limit fee. A new card or PIN reissue can also have certain administrative fees. While these do not sound like much, they add up.

What to remember

Always read the fine print carefully before applying for credit cards or making a purchase. Knowledge of fee schedules and terms of use makes you a wiser financial decision-maker. Knowing these trap fees ensures that the convenience of your credit card never becomes an out-of-pocket cost.