What is a Credit Card?
I remember, in our earlier days, we used to purchase grocery or household things from a single shop. We used to buy things on credit basis and pay the monthly bill to the shopkeeper in single payment for the whole month. Credit Card does the same thing for you. You shop for the whole month and make a single payment on bill due date. With the use of Credit Card you can purchase items from any shop. You need not to stick to a single vendor. This is the advantage of Credit Card. A Credit Card is a popular financial product which is used by every age group. Gen X and Millennial uses Credit Card as status symbol. A Credit Card is very convenient to use and come with money more benefits.
What are the benefits of Credit Card?
- You need not to carry cash every time. Credit card provides liquidity when you don’t have cash or you don’t want to use your cash. It is safer to carry Credit Card than cash.
- Credit Card is like a short term loan. You can use amount upto your credit limit and pay the billed amount on predefined bill due date.
- Even if you don’t have full bill amount to pay on due date, you can carry forward the payment by paying a minimum due amount.
- Most of Credit Cards provide 45 to 55 credit days. If you purchase items on the beginning of billing cycle, you will get 45 to 55 days to pay the bill. You can earn interest on that much amount in saving account or you can create fixed deposit on 1 month to earn extra interest income.
- Some Credit Cards gives various offer including Cash back benefits which make you to save extra money on your purchase.
- Credit Cards gives reward points on the purchases made through card which can be redeemed later.
- Credit cards also provide loans for your emergency needs.
- Some credit cards also provide accidental insurance cover, purchase protection cover and other benefits which make them more lucrative.
Credit Card is a very useful product if you use it very responsibly. You must have a repayment plan first before using Credit Card. Credit Cards attract high interest rates in case of default and can affect you CIBIL score. It can also trap you in debt. Therefore, you must know your repayment capacity before making purchase with credit card.
Let’s discuss all important points one by one which you should never ignore while applying or using credit cards.
THINGS TO KEEP IN MIND WHILE USING CREDIT CARD
A Credit Card is a popular financial product which is used by every age group. Gen X and Millennial uses Credit Card as status symbol. A Credit Card is very convenient to use and come with money more benefits. There are number of companies which are providing credit card and giving very lucrative offers. You can choose any of the company which fulfills your requirement. Credit Card is a very useful product if you use it very responsibly. Here are some tips to keep in mind if you have a credit card.
When you have a credit card, you must be very careful for its security. Always memorize your card number. A number of Mobile apps provide facility to save your card credentials. You have to entre only CVV number to transact. It may that these apps. CVV number is must for any online transaction. It is advised that you must scratch out CVV number from card and memorize it. By doing this you can reduce chance of fraud to zero if you lose your card. It is also advised that don’t carry credit card unnecessarily with you all time. It will help to secure card in case of theft and also reduce unnecessary expenses.
Pick Credit Card wisely
There are varieties of cards available in market of a number of companies. Every card has its own features. Companies first carried out need analysis of individuals by market segment. Therefore, there is a card which suits your need. You just need to analyze your uses and then choose card which suits your expense behavior.
Know the Charge Structure
When you are using a credit card you must know the various charges associated with your card. It can be annual maintenance fee, duplicate statement, late payment charges, excess drawing charges, ATM uses charges etc. Knowing about these you can save some unnecessary charges.
Track Your Transactions
If you are using a credit card you must know about the transaction made by you. You must keep a record of transactions. Companies provide login id and password to check on the statement related to card. To keep an eye on the statement you can keep a check on fraudulent transactions and activities if otherwise happen with your card.
Create Expense Budget
Always create a monthly budget for credit card transactions. You can do this by analyzing your cash flows. Because if you use credit card limit more than your cash inflow, it can lead you trapped in debt. Although Credit card provides revolving of outstanding amount but they charge high interest. So always use card wisely and have a repayment plan first before using card.
Pay on Time
You must be punctual to pay your monthly card bills. Always keep a fixed date on or before due date and keep funds in your account to pay bill. If you miss to pay on time it will reflect in your CIBIL report and will affect your credit score.
Know Yours Rewards
Credit card give you reward points on purchase made by you. Some cards allowed you to make redeem these reward points to buy items from their reward catalogue or to convert them in cash while making purchase on selected merchants. You must know to redeem your rewards points.
Know your other benefits
Credit cards also give you additional benefits along with reward points. it can be personal accidental insurance, purchase protection cover, emi facility, loan facility, cash back offers etc. you must be aware of these benefits. You must read the documents attached to new card in envelop. Also you must keep update yourself about the various ongoing offers.
Never Pay Minimum
Credit card gives you flexibility to pay full outstanding amount or less or minimum amount. If you pay minimum amount of dues you can save yourself from default but they will charge interest rate on outstanding balance and other purchases. So, try to pay bill in full except emergency.
Never utilize Full Credit Limit
If you are using your credit limit full and always revolve the credit, it will give a negative impact to your credit score. As you know a good credit score is necessary to get credit these days, try to utilize your credit line wisely.
Never withdraw Cash
Credit card offer a cash withdrawal limit out of your whole credit line. You can use this limit to withdraw cash from ATM. But you must be aware that if your withdrawing cash from your credit limit it will attract interest rate and other charges. As interest rate charged on cash withdrawal is very high, you must avoid cash transactions.
Use on Trusted Terminals
Always use your credit card on trusted websites or vendor’s terminal. Always take a security check of the terminal or website before using your card. A single mistake can lead to compromise your credentials and you may lose money on fraudulent transactions.
These are basic and very important rules to be followed while using a credit card. If you ignore a single of the above that can be disastrous for you. Credit card is a revolutionary product if you know how to use it wisely.