Monday, 16 September 2013

Credit cards Do's & Dont's

videoCredit Cards to be handled with Care, Do’s & Don’t’ 

Credit cards are one of the most important financial inventions in modern times. But this boon can be a real bane to your finances if not used with care. Here are the Dos & Don’ts.                               

USING CREDIT CARDS FOR DAY-TO-DAY EXPENSES: Almost everyone uses credit cards to buy their day-to-day items. But if one uses it regularly may result in overspending & crossing your monthly budget. So, always draw up your budget for such purchases & use your credit card within this limit. Beyond this point, it is advisable to use debit cards or cash.

USING CREDIT CARDS FOR CASH ADVANCE: Though drawing money by using your credit card through the ATM machine is the easiest way to combat cash shortage, many of us do not foresee the impact it causes on the finances. The rate of interest charged on the advances amount is exorbitant (at 2.5 to 3.5% per month).Not only that, the interest rate gets charged from the first day itself. Besides, you end up paying a flat transaction charge as well. Also, credit cards come with a free credit period of 20 to 50 days. You will be charged late payment fee & high interest of 2.5 to 3.5% per month plus taxes on these charges, if you fail to pay the credit card dues within time. Therefore, restrict yourself from using the credit card on these situations if are not able to generate cash flows to make these payments.

USING CREDIT CARDS FOR TRAVEL ABROAD: There is a charge in foreign currency if you choose to use your credit card (globally-compatible) for foreign currency transactions. You can also be affected by currency fluctuations which affect total amount payable. If you use a prepaid travel card instead, it will stand you in good stead.

USING CREDIT CARDS TO EARN REWARD POINTS: Credit cards entice you to spend more on the credit cards by giving reward points for your credit purchases. Many a time, the items offered are of little or no use or the price is higher than market price. Hence make it a point not to use the credit card just to earn brownie points, which is not healthy.                               

USING CREDIT CARDS IN UNSECURED WEBSITES: While online shopping is popular, there are grey areas to tread. Do not share confidential information on websites which are not secure. Always check for security levels before making credit card payments in such cases.

USING CREDIT CARDS WHEN SPENDING LIMIT IS CROSSED: Stop using the credit card when you are close to exhausting the spending limit. This gives you a good credit rating for renewal purposes as also keeps a check on your expenses.

USING CREDITS DURING DISCOUNT SALE: Don’t allow yourself to be carried away by such offers. Purchase only those which you actually need, not just because the discount offer is huge, say at 90%. Otherwise, you may exceed your budget & spend more than you can afford. USING MULTIPLE CREDIT CARDS: Always keep track of the billing cycle & due date of payment. Do not use the credit card close to its billing cycle. Use the credit card which is farther off the billing date. This way you will get more credit period & handle your finances better.

1 comment:

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