Credit cards offer both convenience and benefits. Careful use can enable you to manage your budget and save.
That piece of plastic in your wallet can be a blessing, depending on how you use it. It can get you great deals. It can let you monitor your spending and thus help with budgeting. It can be a saviour in a cash emergency. A credit card not only lets you shop on- and offline, but also lets you earn rewards and discounts. That's the reason most middle-class people have credit cards.
There are several other advantages. A credit card is easier to carry in your wallet than hard cash, you get interest-free credit for around 45 days - one of the biggest benefits your credit card offers you - and a family member can get a free add-on card.
Cash when you need it
Making big-ticket purchases is easy with a credit card. You don't even need to pay the entire amount at one go. You can convert it into equated monthly instalments. But there's a price to pay - an interest rate that could be as high as 50 percent a year.
In a financial emergency, your card can come in handy to get cash from an ATM. But be sure it's really an emergency, because cash on a credit card is expensive - there is a Rs 350 fee, plus 3.5 percent interest per day. Also, the amount you can withdraw depends on your credit limit.
Reward points
Some cards offer reward points on purchases. You can accumulate these and redeem them later. Of late, co-branded cards have gained popularity. Card issuers tie up with reputed brands to distribute products and services at attractive rates for a niche audience. Based on your buying habits, you can pick from petro cards, shopping, entertainment, and the like.
Many cards have cash back offers. A percentage of what you spend during a given period is credited back to your card.
Free insurance
Several cards offer free insurance that usually covers rail, road and air accidents, accident related hospitalisation, and so on. But it's important to read the fine print carefully, and to ensure that you have adequate cover.
Don’t roll over balances
Always keep track of your billing cycle. This is the time period - about 30 days - from one billing date to the next. All transactions made during this period will show up in your bill. If you paid only part of your outstanding balance last month, the remainder, plus new purchases and finance charges, will all appear in your next statement. For instance, suppose you made purchases worth Rs 30,000 in October, and paid only the minimum amount due of Rs 1,500. Then, suppose you made purchases in November worth Rs 5,000. At the end of November, you'd be paying your previous balance (Rs 28,500), plus interest, a late payment fee and penalties, plus the amount of your new purchases (Rs 5,000) and interest on it.
Making a partial payment and rolling over balances is called revolving credit - something to be avoided. Always pay up entirely or you'll end up paying up to 50 percent interest a year on the outstanding amount.
Be alert
Credit cards are safer than cash. If you lose your card, just inform your bank as soon as possible. You're not liable for unauthorised transactions that occur after you reported the loss. Always scan your credit card statements for unauthorised transactions. If you've been defrauded, contact the card issuer immediately. If the bank can't resolve it, approach the banking ombudsman.
A credit card is a useful budgeting tool, and offers other benefits. Pick yours based on your lifestyle needs. And use it carefully.
Dos and don'ts
• Sign the back of your card as soon as you receive it
• Change your PIN regularly
• Do not give out your card number or CVV number (three-digit number on the back of your card) to anyone on the phone, unless you initiated the call
• Be attentive when your card is being swiped at a store or restaurant
• Tear up your ATM receipts and credit card statements before discarding them
• When shopping online, submit credit card details only through secure websites
• Check your credit card statement for unauthorised charges, and report them to your bank immediately
• If your card is lost or stolen, inform your bank immediately
• Pay bills on time to avoid late fees
That piece of plastic in your wallet can be a blessing, depending on how you use it. It can get you great deals. It can let you monitor your spending and thus help with budgeting. It can be a saviour in a cash emergency. A credit card not only lets you shop on- and offline, but also lets you earn rewards and discounts. That's the reason most middle-class people have credit cards.
There are several other advantages. A credit card is easier to carry in your wallet than hard cash, you get interest-free credit for around 45 days - one of the biggest benefits your credit card offers you - and a family member can get a free add-on card.
Cash when you need it
Making big-ticket purchases is easy with a credit card. You don't even need to pay the entire amount at one go. You can convert it into equated monthly instalments. But there's a price to pay - an interest rate that could be as high as 50 percent a year.
In a financial emergency, your card can come in handy to get cash from an ATM. But be sure it's really an emergency, because cash on a credit card is expensive - there is a Rs 350 fee, plus 3.5 percent interest per day. Also, the amount you can withdraw depends on your credit limit.
Reward points
Some cards offer reward points on purchases. You can accumulate these and redeem them later. Of late, co-branded cards have gained popularity. Card issuers tie up with reputed brands to distribute products and services at attractive rates for a niche audience. Based on your buying habits, you can pick from petro cards, shopping, entertainment, and the like.
Many cards have cash back offers. A percentage of what you spend during a given period is credited back to your card.
Free insurance
Several cards offer free insurance that usually covers rail, road and air accidents, accident related hospitalisation, and so on. But it's important to read the fine print carefully, and to ensure that you have adequate cover.
Don’t roll over balances
Always keep track of your billing cycle. This is the time period - about 30 days - from one billing date to the next. All transactions made during this period will show up in your bill. If you paid only part of your outstanding balance last month, the remainder, plus new purchases and finance charges, will all appear in your next statement. For instance, suppose you made purchases worth Rs 30,000 in October, and paid only the minimum amount due of Rs 1,500. Then, suppose you made purchases in November worth Rs 5,000. At the end of November, you'd be paying your previous balance (Rs 28,500), plus interest, a late payment fee and penalties, plus the amount of your new purchases (Rs 5,000) and interest on it.
Making a partial payment and rolling over balances is called revolving credit - something to be avoided. Always pay up entirely or you'll end up paying up to 50 percent interest a year on the outstanding amount.
Be alert
Credit cards are safer than cash. If you lose your card, just inform your bank as soon as possible. You're not liable for unauthorised transactions that occur after you reported the loss. Always scan your credit card statements for unauthorised transactions. If you've been defrauded, contact the card issuer immediately. If the bank can't resolve it, approach the banking ombudsman.
A credit card is a useful budgeting tool, and offers other benefits. Pick yours based on your lifestyle needs. And use it carefully.
Dos and don'ts
• Sign the back of your card as soon as you receive it
• Change your PIN regularly
• Do not give out your card number or CVV number (three-digit number on the back of your card) to anyone on the phone, unless you initiated the call
• Be attentive when your card is being swiped at a store or restaurant
• Tear up your ATM receipts and credit card statements before discarding them
• When shopping online, submit credit card details only through secure websites
• Check your credit card statement for unauthorised charges, and report them to your bank immediately
• If your card is lost or stolen, inform your bank immediately
• Pay bills on time to avoid late fees
