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How to use credit cards effectively

All of us are reading lot of articles against the use of credit cards. This article is an attempt to explain, how you can use the credit card to your convenience.

What are the benefits in using a credit card?

The Credit card will help you from the worry of carrying cash always. It offers excellent shopping experience without the worry of having enough cash in your wallet always. You can make online purchase using credit cards without the worry of enough cash ready with you.

Then what is the problem in using credit cards?

 What about the bill payment at the end of the billing cycle?

Your credit card bill will contains the details of all the purchases made, payment received from you, interest if any etc. It will tell you the total amount due in the card and the due date of payment.  It will also give you another option of minimum amount due. If you make payment of the total amount due before the due date, you will not have any problems. You can continue to use the card and enjoy the free credit facility till the due date of the next billing cycle. But if you pay only the minimum amount due, then you are going to face the problem of the high interest rate. If you get into the Credit Card Trap, it is very difficult to escape from it.

How much is the interest in credit card?

Normally credit cards charge around 3% per month for the amount outstanding! This comes to more than 36% yearly! Compare this with interest rate of 10% in housing loans, 12% in gold loans, 15% in personal loans etc. Credit card loan is the costliest loan, which you have to avoid if you want to lead a peaceful life.

Will credit card affect my Credit Score /CIBIL Score?

Yes, if you are not repaying your dues in time, it will affect your CIBIL score. So, it is important that you pay the bill in time. If you continue to pay only the minimum amount due, this will also affect your CIBIL score. Once your score is affected, it will take time for the score to improve, even if you clear the dues in full. Frequent application for more and more credit cards also will lower your CIBIL Score.

 But if you have a credit card and pay the total amount due in time, this will help you in building a good credit history and a good CIBIL Score.

How safe is my credit card?

You can opt for SMS alert on your mobile phone. As and when your credit card is used, you will get alerts. Now, you require either a Onetime password (send to your mobile phone) or a secure code already authenticated by the card company. You can even buy card protection policies, at a very low premium. All these will reduce chances of fraud using credit cards.

Which is better, Credit card or Debit Card?

While using the debit cards, money is withdrawn from your bank account immediately. But in the case of credit card, you have to pay only on the due date after that billing cycle. You will get a free credit period. If you are having touring duties, you may have to book air tickets and hotel for official purpose. You can pay using credit cards and get it reimbursed from the company before the due date of the credit card bill. If you use it with caution, it is very helpful.

What is most important in using credit cards?

The following points 2 will help you to get the maximum benefit out of credit cards.

  1. Please don’t have more than 2 credit cards.
  2. Always pay the total amount due before the due date.
  3. Don’t go for any free offers, because there will be hidden charges there.

 

 

 

1 Comment

  • sunilkumar Posted November 13, 2012 10:22 am

    true indeed.Credit card; if used judiciously and total dues paid on or before due date is a wonderful idea. Availing interest free credit up to 45 days is a good idea.
    Judicious use defined as: absolute necessary expenses and avoiding impulsive spends on credit card.

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