A credit card certainly is a great help when you are running out of cash at the end of the month and have expenses that you might not have been able to make otherwise. Here are some credit card rules you need to keep in mind:
Maintain a zero outstanding balance on your credit card
It is often easy to lose track of expenses when shopping with a credit card. But always spend within your means and try to ensure that you pay off your credit card debt once your salary comes in and before the due date so that you are not charged interest.
Pay before the due date
If you have to, put reminders on your phone, circle the date on your calendar and/or tell your spouse to remind you to pay your credit card dues on time. Delaying payment by even a day can mean that you are charged interest and late fees, depending on the card company. Your poor memory could really cost you if you are not careful!
Beware of the minimum payment trap
Let us say you have spent Rs 3000 on your credit card. Your minimum payment for the month might be around 2% of the balance, which is Rs 60.
Once paid, you have a balance of Rs. 2940 upon which you will be charged an interest of 20%(APR) or 1.6% monthly, which is Rs. 47. Therefore, next month when it is time to pay your balance will be Rs. 2940+Rs. 47 = Rs. 2987.
This means of the Rs 3000 credit borrowed, you have only managed to pay off Rs 13. That doesn’t seem right, does it? Oh no, it isn’t. It is always best to pay off as much as you can every month on your credit card, if you are unable to maintain a zero balance on your card.
Do not get tempted by offers of free or pre-approved credit cards
Credit card providers are constantly try to woo new customers with great introductory offers, waivers of fees, rewards systems, etc. It is really important for a potential customer to see whether he really needs a new credit card.
Check how long annual maintenance fees and charges are waived for, compare interest rates to your other cards, read the fine print and make sure you make a completely informed decision.
Never withdraw cash on your credit card
It is not at all advisable to use your credit card to withdraw cash. For starters, most credit card companies charge you a hefty fee for cash withdrawals. Secondly, you are charged interest on the amount withdrawn from the day you withdraw cash. There is no interest-free grace period with cash withdrawals.
Always check your credit card statements
Credit card companies make mistakes too. Always check your credit card statements to make sure you haven’t been charged twice for something. Also, check if you have been charged a late fee when in fact you paid on time.
Report a lost card immediately
It is very important that you report a lost card as soon as you can or if you receive intimation of a charge to the card that you did not make. Although you can make a case to prove that your card was stolen and used fraudulently, it will take a lot of time and effort. In the meantime, the thief could very easily have used up your credit and severely damaged your credit history.
It’s funny how a small piece of plastic card in your pocket can give you so much reassurance, especially at the end of the month when your bank account is close to empty. And yet a credit card that can give you financial freedom you could not have enjoyed otherwise, can also spell financial doomed, if it is mismanaged. It is important for all credit card users to make sure they are disciplined and follow a few credit card rules to have a healthy financial life.
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