You see an advertisement promoting a ‘lifetime free Credit Card’, and you wonder what the catch is. Are Credit Cards free? If they are, why do banks take the trouble of issuing them?

Whether you pay anything for your Credit Cards or not depends on how you use the Credit Card? In fact, if you use it prudently and smartly, a Credit Card can help you reap many benefits such as rewards, cash backs and discounts.

First, let’s look at the typical charges you may have to pay for a Credit Card.

• Annual fees: Technically most Credit Cards charge an annual fee. But these fees are waived off if you use your card regularly and achieve a minimum spend – for example, the HDFC Bank Visa Signature Card will waive off the annual fee if you spend Rs 15,000 in 90 days of the card issuing date.
  
  If you are a credit-worthy customer, the bank may offer you a lifetime free Credit Card, which means no joining or annual fees.
  
  However, specialised and co-branded cards such as the HDFC Bank JetPrivilege Signature Card do charge an annual fee, but they more than compensate you with welcome bonuses, complimentary lounge access and priority check-ins.

• Finance charges: This is the interest the bank charges if you settle your outstanding Credit Card bills after the statement due date. Your Credit Card gives you 25 to 50 days of interest-free credit. If you settle your Credit Card bill on or before your due date, you won’t have to pay any finance charges.

• Other charges: There are charges you may have to pay based on how you use the Credit Card. For example, if you withdraw cash using a Credit Card at an ATM or you spend over your credit limit, or you lose your card and want a duplicate issued. But if you use your card only for online and offline purchases and settle your bills before due date, your Credit Card is free.
  
  If lifetime free Credit Cards come without charges, how do banks earn money from the service? A major portion of Credit Card revenue for banks comes from merchant fees – when you buy a product using a Credit Card, a percentage of its value goes to the card-issuing bank.

So, yes, a Credit Card can be free if you use it smartly.

Read more on how to choose the best Credit Cards.

Are you looking to apply for HDFC Bank Credit Card? Click here to know more!

* Terms & conditions apply. Credit Card approvals are at sole discretion of HDFC Bank Ltd

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