CREDIT CARDS

Introduction

With the advent of E-commerce credit cards have now become the basic necessity. In India, over the past few years, they have rapidly penetrated urban consciousness and are slowly becoming part of our collective existence. But is everything as hunky dory in the world of credit cards as issuers would have us believe. Or is it necessary to take a closer look at the fine print.

Good use, great results

Never use them to meet long term expenses – For instance, you should not purchase an automobile/vehicle even if you card allows it. You should do so only if you have that kind of money in your savings account or through an auto/vehicle loan. The first option is best but the second option is definitely cheaper than the payout on a card.

Never use it to cover short fall in income – Customers also use credit cards to meet the continuous shortfall in their income. Suppose your salary is Rs 20,000 and your expenses are Rs 30,000, you are living beyond your means. You should not use credit cards to meet these expenses; a credit card is not designed for shortfall of funds. “If a customer does this, he is getting into a debt trap”.

Withdraw cash as little as possible – Borrowing on your card is not the smartest thing to do as there is a higher cost attached with it. Suppose you are travelling and need emergency funds, you can withdraw cash up to 40 per cent of your credit limit in cash. If your credit limit is Rs 15,000, you can withdraw Rs 6,000 where you start paying the interest from the time you start taking the funds. Hence the best way out is that you refund the amount as soon as you reach home.