Monday, February 7, 2011

I Got A Credit Card :)

I been using credit card for a while and am comfortable handling it. ie, I never let the interest add up and make it a point to pay the full amount before the last date ( though occasionally I needed to slip this rule). When my cousin called me to say he got his first credit card and he is excited about it, I got to warn him.  At least he should not repeat the mistakes I made...

There is no two opinion about its versatility. It is very useful. Need not carry cash, can use it online or on phone. You can buy things even when your bank balance is zero. It is especially useful when travelling to another country, because we need not go for money exchange ( though our bank will charge a fee). Being accepted even in small towns makes it more attractive.

The stand-by period ( from the day billed and the day to make payment ) of 20-50 days is tempting. If planned properly we can have it over two salary dates ( I never tried it, though ). Most cards offer points for usage which can be redeemed for gifts or vouchers later. And a few offer cash back ( still better ).  So choose the card wisely.

Also for security, it is advised to go for a photo card and the moment you get it, sign it. If someone steals your card and use it, you don't need to pay it. You can challenge the payment to the bank saying that it was a fraud usage. And it is the RETAILER who needs to make sure that the card is genuine. If he misses to verify the photo or signature, that is his problem. 

Have an Internet transaction password. It will ensure one more layer of security. Also it is advised to memorise the CVV no and erase it from the card. If you have more than one card, be cautious with this step !

The interest they charge is huge. Though it may vary from 3 to 3.5 %, it is calculated MONTHLY. When it is calculated annually, it will go up to 35-40 % which is far high compared to loan. So if you have a huge outstanding, it is even recommend to get a personal loan to clear it. It costs 16-20 % or something, which is still much less. And they calculate the interest for the FULL AMOUNT and not outstanding. If your bill was 10,000 and you made a payment of 9,000, they will calculate for the full 10,000 and not the outstanding 1,000. So be careful.

Even EMI option is not very attractive either. And most importantly, the bank will not let you close it before the tenure. They will ensure that they will squeeze the maximum profit from you... And also have a clear picture of processing fee, if you are going for EMI.

Never ever use it to withdraw cash either. It is also charged at the same rate, huge rate.

If used wisely, it can be healthy too. For cash back cards, you can really earn money every time you use it. 

Make sure you will not fall to temptation and use the card every time you see a sale sign ;) And never let the  card go to wrong card. My card was sent to my room when I was away at native. By the time I got it, it was used by my roommates to buy TV, DVD and stand ! Though it was a 'sweet' misuse, every time it may not be...

Happy card days... Make sure it will not make you yell ;)


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