Credit cards are convenient, but if you don't repay the minimum or the entire credit card balance on time, your balance can quickly increase from unnecessary fees.
If you're an HSBC credit cardholder, here's what you need to know about credit card fees such as credit card interest and finance charges.
This is the fee that you have to pay when you don't pay the minimum or the entire credit card bill, or when you make cash withdrawal with your credit card at an ATM.
All HSBC credit cards have an interest-free period. If you repay your credit balance in full by the due date, you won't have to pay any finance charges.
Learn more: What is a 45 days interest free credit card?
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Finance charges are basically any fees associated with credit usage. It is the total of all fees you have to pay. Your credit card finance charges could include:
The most common type of finance charge is credit card interest, which is a percentage of what the amount you owe if you haven't repaid the minimum or the entire credit card bill.
Finance charge will be charged on the ending balance amount on a daily basis from the transaction dat.
Annual fee is usually fixed charge. Moreover, other fees such as foreign transaction fee, cash advance fee and late charge are charged as per percentage of the transaction value.
In addition to listing all of your credit card transactions, your monthly statement will show you any finance charges you might need to pay.
Read more: Understanding your credit card statement
If you use your credit card to make a cash advance, you'll be charged finance charge and cash advance fee right from the moment you make the withdrawal. We recommend that you only use the cash advance in case of emergency, and only when you are aware of all of the the surcharge and know you can afford them.
Learn more: What is a credit card cash advance?
Here is an example to show you how we calculate the finance charge and fees for cash advances:
Let's say you're using an HSBC Visa Cash Back Credit Card with a credit limit of VND 25 million, a finance charge of 33% per year and cash advance fee is 4% per one withdrawal, regulated by the bank.
On 1 February, you withdraw VND 10 million cash from the ATM with plans to repay it in 14 days. The total amount you would have to pay back on February 14 is: VND 10,531,638.
To be sure you've paid the full, correct amount, we recommend rounding up the repayment amount. That would make your total repayment VND 10,532,000 instead of VND10,531,639.
First, find out what your credit card's interest free period. As long as you repay your purchase in full during this time, you won't have to pay any finance charges. There are some cases when making your credit card balance, as follows:
|Way to make a repayment of credit card balance on the due date||Pay off 100%||Pay off from 5% to under 100%||Pay off from under 5%|
|Finance charge||No finance charge incurred||Finance charge incurred||Finance charge and late charge incurred|
|Description||Make a full repayment||Make a partial repayment that is higher than the minimum payment||Make a partial repayment that is lower than the minimum payment|
|Way to make a repayment of credit card balance on the due date||Finance charge||Finance charge|
|Pay off 100%||No finance charge incurred||No finance charge incurred|
|Pay off from 5% to under 100%||Finance charge incurred||Finance charge incurred|
|Pay off from under 5%||Finance charge and late charge incurred||Finance charge and late charge incurred|
|Way to make a repayment of credit card balance on the due date||Description||Description|
|Pay off 100%||Make a full repayment||Make a full repayment|
|Pay off from 5% to under 100%||Make a partial repayment that is higher than the minimum payment||Make a partial repayment that is higher than the minimum payment|
|Pay off from under 5%||Make a partial repayment that is lower than the minimum payment||Make a partial repayment that is lower than the minimum payment|
How to calculate finance charges for each of the above cases:
Make a repayment of credit card balance in full on or before due date
We advise you to choose this way because if you follow this option, no finance charge will apply (excluding cash advance which is subject to a different charging scheme).
Make a minimum repayment of credit card balance on or before due date
In this case, finance charge will apply. Please refer to the illustration below for more details:
Let's say you're using a HSBC Visa Classic Credit Card with an interest rate of 31,2% p.a., you need to pay at least 5% of your credit card bill or VND 50,000 whichever is more.
So for example:
Your credit card statement date is the 7th of every month, the payment due date falls on the 22nd of every month. During the last month, you in turn made the following transactions:
On 28th April: you bought a set of pots priced VND 1 million. Hence, your ending balance was VND 1 million
On 7th May: this is the statement date. Your credit card statement included the following information:
On 10th May: you buy the groceries for VND 500,000. Hence, the accumulated balance increased to VND 1,500,000
On 22nd May, is the due date – i.e., the day when the ending balance amount on 7th May is due for payment.
On this day, you made a repayment of VND 600,000, leaving an ending balance of VND 900,000 on 22nd May.
On 7th June, is your next statement date. At the time, you hadn't bought anything else. Hence, the ending balance is VND 900,000 with the finance charge added.
Finance charge at the statement date of 7th June is calculated as follows:
In total, the finance charge on your credit card statement on 7th June you need to pay in this case is VND 38,724
Don't make at least a minimum repayment of credit card balance on or before due date
Finance charge and late charge will apply in this case.
Continuing with the example above, if you make a full repayment after the due date – e.g., you repaid
VND 1,000,000 on 28 May, instead of the due date of 22 May
On 7th June: The credit card statement shows the your ending balance including VND 500,000 with the finance charge and the late charge.
Finance charge at the statement date of 7th June is calculated as follows:
In total, the finance charge you need to pay is VND 38,040
Late charge on 7th June is VND 80,000 because late charge is 4% the minimum payment (minimum 80,000 VND). In this example, the late charge of 4% x 50,000 = VND 2,000, which is less than 80,000 VND.
In short, the finance charge and the late charge on your credit card statement on 7th June you have to pay is 38,040 +80,0000 = VND 118,040
Your instalment is usually included as part of your minimum payment, which means you need to pay your instalment monthly to avoid late payment fees.
What happens if you miss your instalment payment?
As an example, imagine you are using an HSBC Visa Platinum Credit Card with an interest 33% p.a. to buy a VND 36 million motorbike. You bought it with a 12-month term instalment of VND 3 million per month. To keep things simple, let's say you haven't used your credit card for any other purchases.
Your first credit card payment date was on 2 May but you weren't able to make the payment until 5 May. Here's what happens.
So when you make your payment on May 5 you'll need to pay VND 3,128,137.
Total 3,000,000 (instalment payments) + 120,000 (late payment fee) + 8,137 (finance charge) = VND 3,128,137
It is possible to enjoy all the benefits of credit cards without ever having to worry about fees and interest rates. Here's how:
Paying your credit card balance on time is the only way you will be eligible for an interest-free period for the next month.
From the moment you receive your statement, you have a grace period of 15 to 25 days to pay your balance with no finance charges. As long as you repay the amount you borrowed in full by the last day of this period, you won't have to pay any finance charges.
In some cases, if you can't pay your credit card balance in full on time, try to make the minimum payment. You'll only be applied the finance charge of the credit card without the late charge. However, consider repaying the remaining balance as soon as possible as the finance charge will continue to accrue based on the unpaid amount.
In case you're in a bit of financial difficulty and can't pay off the entire balance, be sure to pay the minimum to avoid any late fee. Then, pay off the remaining balance as quickly as possible.
Any overdue debt will be charged daily interest. You also won't be given the benefit of any interest-free period on
Read more: 7 ways to make your HSBC credit card payment
You should avoid making cash advances or use it only in emergencies. Finance charge is charged daily from the moment you withdraw the money until you fully repay it (with finance charge). If you need to borrow cash, a better option is to consider a personal loan.
A credit card is best saved for making ordinary purchases. This will help you keep a good credit score, which will go a long way to getting a preferential interest rate if you ever want to apply for a bank loan.
Before you buy something, you should consider how long it will take you to pay for it.
If you still owe money on your credit card from the previous months, you should limit your spending. Try to pay off your previous bill before you add more to your debt.
For large transactions where you know you'd have trouble making the entire repayment all at once, you can take advantage of the 0% interest instalment offer. This would relieve financial burden.
If you have an HSBC credit card you can use our 0% instalment program at hundreds of major brands from technology, education, healthcare. Even at stores not partnered with HSBC, you can still sign up for 0% instalment with a very low conversion fee.
Read more: What is a credit card instalment plan?
Credit card finance charge is a very important concept if you have a credit card or if you're thinking about getting one. But now you can see that as long as you remember a few key rules, you'll never have to worry about credit card finance charges.