Using credit card become one of the common financial life in India. In fact, this habit is taken from the western world where they plan spending before they earn. Credit Card logic is very simple, you are spending today for the tomorrow’s earning. This itself shows how much risky to manage credit cards, if you are not managing the credit cards effectively, it will collapse your financial life tomorrow. Also be advised that credit cards debts are very expensive than any other debts. That is the reason why banks are chasing the customers to sell their cards. There are many points which needs to be considered while purchasing the credit cards. Here I have listed down some of the very important or a fact about the credit cards. Please read this article and write down your feedback in the comments section.If you are interested in receiving our future articles, please subscribe here, like our facebook page.
1. Credit Score
Using Credit Card may impact your credit score. You have to carefully pay the minimum amount due to avoid any negative points on your credit report. As you are aware, credit reports are one of the important factor to approve your loans. This is one stop verification for all the banks in India to check the customer’s loyalty on repaying the dues. One of the worrying fact is that many of banks customers not known about the credit score, they realized only at the time of taking the loan. Unfortunately it will be too late to rectify your problems on the credit report.What are the major concerns that impacts the credit score:
- Having more than one credit card for an Individual. If you have more than one credit card and it is unused, please return to the banks. However, there is no clear indication of how the credit agencies are using the credit cards history to reward points. Say, if you have three cards with the credit limit of Rs. 1.5 lacs, if you spend Rs. 75000 per month, it shows that you are utilizing 50% of your credit limit. Suppose if you return one card which has the credit limit of Rs. 50000. This will will have a impact of 75% utilization of credit limit which may impact your credit score. If you want to return your credit cards, please do it gradually.
- If you are the only earning member in the family, try to get credit card on non-earning member of your family. When you apply for the loans, only earning member will be eligible to repay the loan. But, if you have a credit card and maintaining a good credit history for a long term, this will help you to show the good track record.
- When you close a unused credit cards, don’t close the cards which have very long term credit history. Close the ones which don’t have any credit record. Good long credit record is boost for your credit scores.
- Don’t maintain dues in the credit card account, try to pay off all the outstanding amount as early as possible.
- You never miss out the minimum due payment. This is one of the major negative signal to the bank. You will be listed as the defaulters in credit report.
- One of the serious challenge faced by the banks are, customers change their address without clearing the dues. Note that you have mentioned your PAN to the bank. All your transactions are uploaded to the credit agency. If you are not closing your account, it will hurt you in the future. Also there is more chance that bank will mark you under the black listed customer.
2. Interest Charges
It is one of the myth about the credit cards. How the interest rate is calculated and what percentage it is calculated?. Be noted that interest rates for credit cards are much higher than the any other loan types. It is about 30-35% per anum. When banks tell the customer, 2-3% per month, it would mislead the customers. Because, any interest types are always denoted in year, but credit card interest rates are denoted by monthly basis. If you calculate that for a year, it is very high.
Please remember the following important points about credit card:
- Interest is calculated only after the grace period is completed. Normally credit card payments have the 20-25 days of grace period after the billing date.
- Grace period is applicable only if you have cleared all the dues in the previous cycle. If you have any due pending from the previous cycle, any payments in the current cycle will be charged immediately.
- Interest rates vary from 30% to 45%.
- Interest free EMI option in the credit cards carry a processing fees. Please aware of this processing fees before applying for the interest free EMI.
- If you are not responding to the credit card dues, pending amount will be added to your account till you close the account. Please don’t ignore the Credit Card outstanding dues.
3. 3D Secure Service
3D Secure Service first introduced by Visa for the additional authentication for Visa issued cards. Later this facility is adopted by Master Card. The well known 3D secure services are Verified By Visa (VBV) and MasterCard Secure Code (MS). If you have credit card with any of these companies (most of the cards are issued by these two companies), you keep in mind that there is one extra authentication mechanism for the online merchants. This will provide more security and confident for the customer. How do you register for this service:
- Every bank has a link in their website to register for the PIN number
- Once you received debit / credit card, login to the website and search for the 3D Secure
- Enter your card number and login to the home page
- Click on the generate PIN number. You can later change the PIN number and secret word.
- This PIN will be used while doing any online shopping.
There are many complaints from the credit card customers that banks are charging fees after closing the account or when they are not using the cards. It is very important that you have to close your credit card account till the closure with step-by-step avoid any problems in the future. Please consider the following points in your mind while closing your credit card account.
- First important thing is, bank will not close your account unless you have paid the outstanding dues. As a first step, contact the bank and pay your dues.
- If you have cleared all your pending dues, then call to the bank and tell them your plan to close the account. You have to follow the process as mentioned by the banks. In most of the cases, after getting the confirmation from the banks that the account is closed, customer has to send the credit card back to bank after cutting into pieces.
- Make sure that you got the acknowledgement from bank that your account is closed. Have this in a letter or mail for the future verifications. If you have not received the confirmation letter from the bank, insist them to send the letter and get it records for your reference.
Do you have credit card? Please write down the number of credit cards you own and spending habits. Have you ever missed the due date for the credit card. Share your embracing moment with a credit card company like charging more interests, unnecessary fees levied in your account, etc. These are very common with most of the credit card companies. Customers has to be very careful on reviewing the card statements periodically to avoid any extra charges. I have earlier written 7 Great Tip for Smart Savings which has final point as the credit card charges. If you are interested in receiving our future articles, please subscribe here, like our facebook page.