Credit Card... Once a "glamorous" item, now becoming to be part of salaried people's monthly budget......crazy? Still you can see people who poses with a one or deck of credit cards nowadays, to show others and feel proud about it! Perhaps, still there are people who hates (actually "fears") to have Credit Card...
But question is how many of those use the Credit Card properly & efficiently? Being the Credit Card user of more than 5 years, here is my own do's & dont's based on my experience that I would like to share.
Dont's are actually very important than the "Do's" so lets start with the Dont's :-) :
1. Never pay only the "Minimum" amount when paying for the credit card bill. The outstanding amount will attract huge interest of 3% to 4% per month. Also you will *NEVER* get the credit interest free period if you always pay the "Minimum" amount. So better payout the entire outstanding.
2. Never purchase using Credit Card, when you are not sure of when/how you can repay that amount.
3. Never withdraw cash using Credit Card, its very costly! It has more hidden charges than it looks. There is a default service charge starting with min of Rs.300 + service tax. Next the interest rate is very high, more than 3%. Also you may not get the interest free credit period for the cash withdrawals, so be wise.
4. Try to avoid telemarketing calls on Credit Card offers. Most of the telemarketing calls on Credit Cards offers are well designed to make us fools. They will expect only your "OK" acceptance to get recorded. So try to avoid *as much as possible* the telemarketing calls on Credit Card offering.
5. Do not keep all the Credit Cards in you wallet always. Bring the Card only when you think you need and necessary. This avoids unnecessary purchases. If you have the card with you, then you never mind your budget and start purchasing things that are absolutely not necessary at that time. Even if you have the card with you, avoid any unplanned purchases only because you have the card, unless is absolutely necessary in the near term or you can afford to pay it back.
6. Avoid *as much as possible* taking EMIs on your credit card purchases. Its true that interest is less than regular purchases, but actually it is costlier, here is how & why. When you take a EMI purchase, you are implicitly have outstanding till the last EMI is cleared.
7. Think many times, before taking a loan-on-card facility. Unless you have *no other* alternative, don't take a loan-on-card. Normally it is expensive than a personal loan. But in case you need, then don't commit with the initial interest rate offered. You have to bargain for a low interest rate, they will say "I need to discuss with my leaders, etc", make them do. Unless they come up with a lower interest, never give acceptance.
8. Don't possess too many credit cards, it will be very difficult to keep track of the usage.
9. As much as possible, don't accept the credit limit increase offered by banks, it will crap us in future for sure. Use a limit that is suitable for your budget.
Do's:
1. As much as possible, try to pay the total outstanding amount. This benefits in enjoying the interest free credit period!
2. Pay the outstanding before the due date. This is very important! When you can't afford the total outstanding, make sure to atleast pay the minimum due within due date. Nowadays all banks are linked with CIBIL, your credit history is very important. You may be denied a home/personal/car loan due to a poor credit rating. So manage the card wisely!
3. If you can afford, make your monthy household purchases using credit card. This earns you some reward points as well some interest too :). Wondering how your purchases earns you interest? here is how:
Consider you are making a credit card purchase of Rs.10,000 in a shop on 1-Sep-10. And assume you have a interest free credit period of 50 days (assuming your due date for this purchase is 20-Oct-10). Since you have not used your cash from the a/c, the account will have additional Rs.10,000. Now all banks are calculating the interest on savings bank balances on daily closing basic, so *it earns* you Rs.55! apart from the reward points you get on the card based on what the different cards offer, atleast some 75pts worth atleast 30-40Rs!
*****You should consider this *one and only if* you can pay the outstanding in full for every month. Otherwise, this will not be of any use******
Advantages of having a credit card:
1. The main advantage is online transactions! If you are a frequent traveler you should consider having atleast one good credit card. Since most of the airlines, bus, train transport & agents are offering booking the tickets using credit card. It saves a lot of personal time and makes the life much easier!
2. Makes the monthly budget more flexible.
3. A properly maintained credit history brings you so many offers, like, low interest rates on loans, or some other offers from the credit card issuing bank. But the thing is you should use the card wisely!
Disadvantages:
1. The main disadvantage is it can make you in "debt", when you are not using the card wisely!
2. Misuse or online fraud! This is the most common thread nowadays! But you can easily avoid this, if you are careful enough! You should keep all your card credential most secret. while making online transactions make sure the site is a secure site. A secured site always have the url starting with "https://". Never do any online transaction in a site whose url does not start with "https://".
My conclusion is that having credit card will be definitely useful and beneficial, assuming it is used wisely!
So, go and get a credit card, if you don't have one! Use wisely, enjoy!
My recommendation (Rank): (I prefer "VISA" card)
1. CitiBank offers the best benefits of all, so my first choice is go with CitiBank cards.
2. SBI cards
3. ICICI Bank cards
4. HDFC cards
5. Try to avoid AMEX cards, until it is absolutely necessary, except for corporate offers.
Also when picking a type of card, choose wisely according to your profile:
1) If you are a frequent traveler, pick a co-branded card associated with any of the airlines or travel agents. For eg: CitiBank JetAirways Card. You can redeem the reward points for tickets.
2) If you have car, then you may opt for a co-branded card, like, "CitiBank Indian Oil Card". You can redeem your reward points earned for fuel. There may be more benefits.
3) If you shop a lot, you may opt for a cash back card or some co-branded card offers more benefit in shopping perspective.
Having one card in each of the above is fine, but again the rule is.... "You should use it wisely" :-)
Here is some tips that citibank is offering to their customers:
http://www.online.citibank.co.in/portal/newgen/creditwisely/cc-tips.htm
The above info is compiled based on my experience using credit card for the past 9years as well as some tips from some other sources. Hope this helps a little...
Your comments/suggestions are always welcome.
Reach me @ ssivarajbe at gmail.com
But question is how many of those use the Credit Card properly & efficiently? Being the Credit Card user of more than 5 years, here is my own do's & dont's based on my experience that I would like to share.
Dont's are actually very important than the "Do's" so lets start with the Dont's :-) :
1. Never pay only the "Minimum" amount when paying for the credit card bill. The outstanding amount will attract huge interest of 3% to 4% per month. Also you will *NEVER* get the credit interest free period if you always pay the "Minimum" amount. So better payout the entire outstanding.
2. Never purchase using Credit Card, when you are not sure of when/how you can repay that amount.
3. Never withdraw cash using Credit Card, its very costly! It has more hidden charges than it looks. There is a default service charge starting with min of Rs.300 + service tax. Next the interest rate is very high, more than 3%. Also you may not get the interest free credit period for the cash withdrawals, so be wise.
4. Try to avoid telemarketing calls on Credit Card offers. Most of the telemarketing calls on Credit Cards offers are well designed to make us fools. They will expect only your "OK" acceptance to get recorded. So try to avoid *as much as possible* the telemarketing calls on Credit Card offering.
5. Do not keep all the Credit Cards in you wallet always. Bring the Card only when you think you need and necessary. This avoids unnecessary purchases. If you have the card with you, then you never mind your budget and start purchasing things that are absolutely not necessary at that time. Even if you have the card with you, avoid any unplanned purchases only because you have the card, unless is absolutely necessary in the near term or you can afford to pay it back.
6. Avoid *as much as possible* taking EMIs on your credit card purchases. Its true that interest is less than regular purchases, but actually it is costlier, here is how & why. When you take a EMI purchase, you are implicitly have outstanding till the last EMI is cleared.
7. Think many times, before taking a loan-on-card facility. Unless you have *no other* alternative, don't take a loan-on-card. Normally it is expensive than a personal loan. But in case you need, then don't commit with the initial interest rate offered. You have to bargain for a low interest rate, they will say "I need to discuss with my leaders, etc", make them do. Unless they come up with a lower interest, never give acceptance.
8. Don't possess too many credit cards, it will be very difficult to keep track of the usage.
9. As much as possible, don't accept the credit limit increase offered by banks, it will crap us in future for sure. Use a limit that is suitable for your budget.
Do's:
1. As much as possible, try to pay the total outstanding amount. This benefits in enjoying the interest free credit period!
2. Pay the outstanding before the due date. This is very important! When you can't afford the total outstanding, make sure to atleast pay the minimum due within due date. Nowadays all banks are linked with CIBIL, your credit history is very important. You may be denied a home/personal/car loan due to a poor credit rating. So manage the card wisely!
3. If you can afford, make your monthy household purchases using credit card. This earns you some reward points as well some interest too :). Wondering how your purchases earns you interest? here is how:
Consider you are making a credit card purchase of Rs.10,000 in a shop on 1-Sep-10. And assume you have a interest free credit period of 50 days (assuming your due date for this purchase is 20-Oct-10). Since you have not used your cash from the a/c, the account will have additional Rs.10,000. Now all banks are calculating the interest on savings bank balances on daily closing basic, so *it earns* you Rs.55! apart from the reward points you get on the card based on what the different cards offer, atleast some 75pts worth atleast 30-40Rs!
*****You should consider this *one and only if* you can pay the outstanding in full for every month. Otherwise, this will not be of any use******
Advantages of having a credit card:
1. The main advantage is online transactions! If you are a frequent traveler you should consider having atleast one good credit card. Since most of the airlines, bus, train transport & agents are offering booking the tickets using credit card. It saves a lot of personal time and makes the life much easier!
2. Makes the monthly budget more flexible.
3. A properly maintained credit history brings you so many offers, like, low interest rates on loans, or some other offers from the credit card issuing bank. But the thing is you should use the card wisely!
Disadvantages:
1. The main disadvantage is it can make you in "debt", when you are not using the card wisely!
2. Misuse or online fraud! This is the most common thread nowadays! But you can easily avoid this, if you are careful enough! You should keep all your card credential most secret. while making online transactions make sure the site is a secure site. A secured site always have the url starting with "https://". Never do any online transaction in a site whose url does not start with "https://".
My conclusion is that having credit card will be definitely useful and beneficial, assuming it is used wisely!
So, go and get a credit card, if you don't have one! Use wisely, enjoy!
My recommendation (Rank): (I prefer "VISA" card)
1. CitiBank offers the best benefits of all, so my first choice is go with CitiBank cards.
2. SBI cards
3. ICICI Bank cards
4. HDFC cards
5. Try to avoid AMEX cards, until it is absolutely necessary, except for corporate offers.
Also when picking a type of card, choose wisely according to your profile:
1) If you are a frequent traveler, pick a co-branded card associated with any of the airlines or travel agents. For eg: CitiBank JetAirways Card. You can redeem the reward points for tickets.
2) If you have car, then you may opt for a co-branded card, like, "CitiBank Indian Oil Card". You can redeem your reward points earned for fuel. There may be more benefits.
3) If you shop a lot, you may opt for a cash back card or some co-branded card offers more benefit in shopping perspective.
Having one card in each of the above is fine, but again the rule is.... "You should use it wisely" :-)
Here is some tips that citibank is offering to their customers:
http://www.online.citibank.co.in/portal/newgen/creditwisely/cc-tips.htm
The above info is compiled based on my experience using credit card for the past 9years as well as some tips from some other sources. Hope this helps a little...
Your comments/suggestions are always welcome.
Reach me @ ssivarajbe at gmail.com
