What are the hidden costs involved in lifetime free credit cards? 6 key points to know | Mint

Have you ever been approached by a bank’s representative who tried to sell you a credit card which is free of charge and will always remain so? Oftentimes, it happens that you buy a product with an assumption that it has certain features but later you discover that there is more than what meets the eye. The same thing can happen in the case of credit cards too.

Here, we dig deeper to find out what the hidden costs involved in the case of credit cards which are ‘lifetime free’.

Reality of lifetime free credit cards: 6 points to note

I. High interest rates: While there are no annual fees, these cards may carry high rates of interest, thus making your card usage more expensive. This needs to be factored in as you apply for a ‘lifetime free’ credit card.

II. Foreign transaction conversion fee: Although there is no annual fee, these cards may have a forex mark-up fee (between 2 to 4 percent) which is chargeable at the time of making payment for a product or service in foreign currency – say US dollar or British pounds. This needs to be kept in mind at the time of securing a ‘lifetime free’ credit card.

III. Overlimit fees: When you opt for cash withdrawal or use the card beyond its credit limit, the bank could impose an overlimit fee on it. This is another charge one should be mindful about.

IV. Late payment penalties: When the credit card bill is not paid on time, there could be late payment penalties – even if the card is lifetime free. So, as a cardholder, you should be aware of this as well.

V. Inactivity fees: Some card providers may impose fees when the card is not used frequently. Another way of looking at it is that the banks waive off annual fee for some cards only when the total spend in the preceding year crosses a threshold.

VI. Processing fees: Although not a common fee imposed by banks, there could be a small fee which the bank may impose in the name of processing or for administrative purposes.

Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.