Do’s And Don’t’s Of Using Credit Cards
Scenario 1: One day when I was just about to sit down at my workstation I noticed my colleague rummaging through his wallet and taking out three credit cards. Given that he was younger to me and a close friend, I asked about the reason behind carrying three credit cards. He clearly answered “ Oh I use one card and pay off the card bills with the other two.”
Scenario 2: Out on a shopping spree with my friend and her mother, there was an article, which the lady wanted but my friend told her to hold it off till the next month as she was low on budget. To this the lady exclaimed, “Why? Pay it with your credit card!” Mind you the article was not a cheap one.
Do these scenarios seem familiar to you? How many of you will be surprised if I tell you that maximum number of people who own a credit card do not know how to use it responsibly?
Let me tell you these episodes are as real as you and me. If the first statement took me by surprise, I was taken aback by the second.
Keeping this in mind this article will try to simplify the use of credit cards through a basic do’s and don’ts.
Keep track of your transactions
It is always advised to track and thoroughly go through your credit card transaction receipts via email statement or an SMS alert. Also it is best to adopt the habit of verifying your credit card statement as it can help you rule out discrepancies if any.
Keep a check on credit profile
The credit card companies share your details regarding repayment of dues to organisation like CIBIL, who instead rate you with points ranging from 300-900. This score can help you put forth a strong base while availing for a loan in the future. Also it can help you to point out any wrong statement.
Understand credit card charges
You must always read and understand the charges associated with the card before signing up for it. Mostly credit card chargesinclude joining and annual fee, late payment fee, cash advance fee, over limit charge and so on. It is important that you read and understand the charges along with the ‘Terms and conditions’ beforehand to avoid trouble afterwards.
Keep yourself updated
It is always better to be safe than sorry. Hence you must learn to be responsible with your credit cards and the first step towards it is to make yourself aware of the prevailing fraudulence in the industry. The best way to do so is to go through the email statements sent by the credit card company as they provide you with necessary information about the same.
Now here is what you must NEVER Do
Never miss your payment
As stated above, the details of your repayment habit is shared with CIBIL and a lot rides on it. The credit card companies provide for an interest free period of almost 45 days, but will also charge 22-45% per annum on failing to payment. Therefore, make it a habit to clear off dues on time.
Never pay the bare minimum
Many consider that paying the basic minimum amount can help them evade trouble of being called a defaulter. However that is not the case. Although you will not be called a defaulter but a certain amount of interest will still be added to it. So, always try to pay the entire due amount and on time.
However, unforeseen events can come unannounced, during those days you can pay the minimum amount but be cautious and do not increase the card limit with shopping sprees. Try to avoid using the card until you are sure that you will be able to pay the new charges again.
Do not exhaust the entire limit
Another factor that plays an important role in your credit reputation is your utilisation behavior of the card. Although financial advisors have a difference of opinion regarding the ideal usage percent, but are unanimous on the fact that you must not utilise the full amount. Some even suggest that credit cards should be used to pay recurring charges like utility and mobile bills to avoid exhaustion. Also tracking your utilisation ratio on your credit card website is a healthy habit to inculcate.
Do not share your card details
This is a standard norm. It is always advised that details regarding bank account, debit and credit cards should never be divulged to a third party for your own safety.
Be careful of websites
You swipe your credit card during both online and offline shopping, but before you do so have you ever thought of verifying the website? Given the technological advancement, several shopping websites have mushroomed in the space hence it is of utmost importance that you check the authenticity of the website and shop from only authentic website. Also never rely on public computers or Wi-Fi as there is a fear of getting your information hacked.
With a little precaution and caution a credit card can make lives much easier. But do remember to use it responsibly! That is the key to owning a credit card.