Credit cards stretch the credit limit – but at a heavy cost: Before using the Credit card, be sure to make the payment without fail by the due date. Credit cards come with a free credit or grace period of 20-50 days. But beyond this date, revolving credit attracts substantial interest -30% p.a. Compounding on a monthly basis. Prefer auto debit method in your account so that you don’t miss the due date.
Cash withdrawal attracts a huge penalty from day one: Withdrawing money from an ATM is an easy way to solve immediate cash shortage; but with a huge interest rate of 2.5-3.5 per cent every month, from day one besides a flat transaction fee.
Signs of a bad borrower: Making only a minimum payment and applying for many loans every month may spell trouble. It gives a wrong impression of your borrowing habits.
Limited use of credit limit: Using up more than 60% of your credit limit shows too much dependency on credit. This could adversely hurt your Credit Score
Selective usage only: Using the credit card multiple numbers of times or its use for cash withdrawal attracts as significant service charges.
Limit over expenditure: Regular use of credit cards for day to day purchase of groceries or household items encourages excessive over-spending. It’s better to use cash or debit cards to avoid this.
Don’t use the credit card, just for reward points: credit card companies come up with seemingly attractive offers and high reward points for purchases. Customers sometimes get enticed and land up with hefty bills for unnecessary purchases.
Don’t shop at unsecured websites: Online shopping is a convenient but risky way of shopping. Be careful while sharing your confidential information on insecure websites.
Credit Cards-choose what you need, not what they give: They are a sure shot way of exceeding your budget and spending more than what you can afford. Impulsive purchasing just to get a discount could lead to a debt trap.
Fraudulent Deals: Vaibhav a Bangalore-based IT professional, received an SMS from his bank stating a payment of $ 59 was charged on his credit card. He immediately informed the bank that he had not made any such deal. The advised him that “they would investigate the matter” but never got back to him. The only calls he received were from the claims department asking him to make the payment.