Outlook Money
Credit cards offer a lot of convenience, but they do come at a cost. If you are spendthrift and bad with your budget and spending pattern, you could quickly fall into a debt trap. Keep note of these eight facts before taking a new credit card
Credit cards come with a high rate of interest. If the user fails to pay the credit card bill on time, they are liable to be charged with a rate of interest that could be as high as 2-3.5 per cent per month.
A low CUR is what one should aim for in order to maintain a good credit score. Typically, one should not utilise more than 30 per cent of the credit limit.
People use multiple cards to keep track of their CUR, but too many cards might turn out to be a risk. Also, using one card to pay another is not a good practice.
One of the benefits of using a credit card is reward points on every purchase. These points can be redeemed as coupons or discounts. Check with your issuer on where all you can receive these discounts.
Credit cards also extend the facility of pre-approved jumbo loans, thus allowing users to borrow money without additional documentation.
Credit cards also offer the facility of converting large purchases into equated monthly installments (EMIs). This is quite helpful as it spreads the payment over a longer tenure.
You can withdraw cash on your credit card, but do note that the rate of interest on such cash withdrawals is exorbitant. Credit cards charge a fee in the range of 2-3 per cent on the amount withdrawn.
Credit cards also levy an annual fee. However, there are cards that could come for ‘free for life’, though they are rare, while some could offer conditions such as ‘first-year free’ or waiver of annual charges.