Skip to main content

Personal Finance: Understanding Credit Card rules to escape from the debt trap

Swipe-now-pay-later attitude could land credit card holders in a soup if they don't understand the charges levied by card issuers


   Credit crad gives you the ease to shop anywhere and everywhere with minimal hassle. It helps you buy big and lets you pay later, with a one-month grace period. But not understanding the terms and conditions in a credit card — like the interest and other charges levied by card companies — could leave you gasping under a mountain of debt. Often, a cardholder is struck by the realisation only when the monthly credit card statement reflects the hefty charges. For every card holder, it is imperative to study the 'Most Important Terms and Conditions' (MITC) listed on the card issuers' websites carefully. Here are some key clauses you need to be aware of, in order to avoid rude shocks later.

Cash Withdrawal

While your credit card can be used to withdraw cash from the automated teller machines, or ATMs, if required, it is best to save this option for emergencies. This is because cash withdrawal typically attracts an upfront charge — of close to 2.5% of the amount withdrawn. Moreover, unlike cards swiped at point-of-sale (POS) terminals where the amount becomes due after the expiry of the credit or grace period allowed to the card holder, in this case, the payment is due from the date of withdrawal. The rate of interest (termed finance charges in credit card parlance) to be paid on the amount could be in the range of 39-45% per annum.

 

Some banks also levy further charges if the withdrawal is made via teller counters at their branches.

Overlimit Charges

If you fail to keep track of your credit limit and end up overdrawing, you would be liable to pay the relevant charges. Typically, it is 2.5% of the overdrawn amount, subject to a minimum of Rs 500. Also, you would do well to remember that your credit limit is inclusive of any charges or late payment penalties payable by you.

Outstation Cheque Charges

All banks have a cheque collection policy that also covers terms related to outstation cheques. If you choose this mode to make your payment, you may be charged close to 1% of the cheque value or 50 for every instrument. Some banks, however, do waive these charges. You need go through your issuer's MITC to understand the applicable charge structure.

EMI Processing Charges

Several times, at the discretion of the credit card companies, cardholders with outstanding dues are allowed to convert the lump-sum repayment due into installment-based payments. The card issuer may promise to charge the existing rate of interest, but you need to watch out for the processing charges that could be built in, pushing up the entire amount payable.

Right Of Lien

If you have availed of a credit card from the bank where you maintain an account, the funds lying in the latter could be used towards repayment of your card dues. This could be applicable to the add-on credit card holder as well. Several card issuers' terms and conditions stipulate that in the event of nonpayment of dues by the card holder, they reserve the right to set-off the amount against any account with credit balance maintained by the individual.

 

Popular posts from this blog

Real Returns in Investing

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Real Returns in Investing     A Anil Singh (name changed), 44, works with a private company and believes in investing his entire savings in fixed deposits. His financials from the year 2000 till date is given in the table. Anil's savings in FDs gave him an average return of around 8%. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 49.80 lakh. The value of his investment today is around Rs 66.71 lakh. Naveen Singh (name changed), 44, works in a similar profile like Anil. However his expenses were on the higher side. His financials are as in the table. Naveen invested only in equities. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 38.40 lakh. The v...

Budget 2014 Highlights for Saving

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

ICICI Prudential MIP 25 - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential MIP 25     (CRISIL Rank 2)   This scheme was launched March 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme. The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 24% equity, 72% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.   For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mai...

Franklin India Smaller Companies Fund - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Franklin India Smaller Companies Fund   While the universe of small-cap stocks in India is vast, there are very few equity funds which take on the task of sifting through this space for good long-term bets. Franklin India Smaller Companies Fund has managed this with aplomb. What we like about this fund is its significant out-performance of its category and benchmark over the last four years, and its ability to moderate portfolio risk despite investing in the riskiest segment of the equity market. This fund's stock selection strategy, like that of Franklin India Prima Fund is focused on finding companies that generate positive cash flows across business cycles. High return on investment and manageable leverage are also filtering criteria. Says R. Janakiraman, fund ma...

How to open a Capital Gains Account?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to open a Capital Gains Account? You can open a capital gains account in an authorized bank. The Government has notified 28 banks which can open the Capital Gains Account on behalf of the Government. You have to apply for opening the account by filling out the required application form (Form A) and submit proof of address, PAN card and photograph. You cannot withdraw funds from a capital gains account using a cheque book or ATM, like you do in your normal savings bank account. There are procedures to be followed to withdraw funds from the capital gains account. Investment in Specified Bonds Section 54EC of Income Act provide that if the seller invests whole or part of capital gains arising from the sale of asset in specified Capital Gains, within a period of six months of the ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now