Do Not Abuse Credit Cards.-00-6339

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Credit cards or plastic cash is now a common mode of payment. The firstborn conception of credit cards works as - `spend now and recompense later! ´ It is important to understand the spending power that your card contains and consequently to employ it intelligently. It is easy to fall into a debt trap whether or not you do not use your card wisely. Here are a number of points you ought to keep in mind when you use your credit card.

Expenses involved in holding and using a credit card.

A credit card company approached Mr. Amit and convinced him that he would genuinely benefit by owning the credit card that the organisation had to offer - status in society, liquidity, ease of payment, low chance of theft, worldwide acceptability, better record holding - he could have it all!

The one thing that he forgot was to be educated in regards to the dissimilar features this card offered, read the agreement and understand the cost of using each of these features. The card offered a grace period or free credit period of 30 days. Thereafter, it charged 3. 5 percent interest on the swell amount due. Mr. Amit was delighted ...
... to get the extra liquidity the credit card offered and spent Rs. 10,000/- on clothes. He could recompense the cash back only after 120 days. Now, also to Rs. 10,000/- that he spent, Mr. Amit was charged interest on Rs. 10,000/-, i. E. Rs. 86/-.

Calculation of Interest amount:

3. 5 * 10,000/100 = Rs. 350 per annum.

Interest remunerated = 350*90/365 = Rs. 86/-

Were the disbursements on the card worth the extra amount he remunerated towards the interest or could he just have waited till he genuinely had the cash to obtain these costs?

Credit cards extend one's current spending power and tempt people to get into unnecessary disbursements.

Another strategy that the card offered is that of minimum payments to keep the card active. Mr. Amit had to make a minimum payment of Rs. 1000/- each month. Assume that he spent another Rs. 20,000/- the next month and remunerated that back too in the fourth month. Whether or not Mr. Amit only made minimum payments on his credit card, he would obtain a total interest cost of Rs. 187/- by the fourth month.

Calculation of Interest amount: -

Interest payable in Month 1: NIL

Interest payable in Month 2: 9,000*3. 5/100 = 315 p. A. , i. E. Rs. 26/- per month

Interest payable in Month 3: 28,000*3. 5/100 = 980 p. A. , i. E. Rs 82/- per month

Interest payable in Month 4: 27000* 3. 5/100 = 945 p. A. , i. E. Rs. 79/- per month

Making only minimum payments on credit cards may be dangerous. It is advisable to make full payment on your credit card bill within the free credit period to avoid interest costs.

Mr. Amit's credit card company similarly charged him Rs. 2500/- in annual fees. This is another cost that he will without doubt have to obtain only for holding the credit card.

The credit card company charged him 2. 5 percent fuel surcharge. So for the comfortableness of using his credit card at the petrol pump, he was similarly incurring an additional cost. It looks to be negligible - but combined over a period of time, the quantity adds up to a significant expense.

The card similarly had a life-time balance transfer strategy. That means that Mr. Amit could transfer his swell credit balance from another card onto this new card! This was swell news as he could get additional grace period to make payments on the swell amount, which was an immediate relief for him. Notwithstanding, this similarly came with a charge - 1 percent for firstborn 12 months, i. E. 12 percent p. A. , and 2 percent for the remaining period of swell loan, i. E. 24 percent p. A.

There could be other concealed charges that a credit card company may charge like over the limit fees, transaction fees etc. Be aware of all these charges before using a credit card.

Rigorous debt collection techniques

Credit card companies at times indulge in unethical and unruly debt collection practices. A great deal of companies hire goons or ‘goondas' for gathering swell payments - do not be amazed whether or not you get calls at odd hours, have surprise visitors at office and have to face embarrassment ahead of your guests - debt collectors will get to you at any time! Things are changing today and companies are discouraged from resorting to such techniques. A great deal of, it's still important to bear in mind that defaulters are at the mercy of credit card companies.

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