Thursday, April 3, 2008

Smart use of Credit Card

Holding a credit card or two is not a bad thing. Indeed it is quite useful
sometimes and beneficial especially in case of emergencies when you
don’t have that much money in your account. But always pay-off the
money (credit card bill) as soon as you get it. Otherwise you may see
it as a burden with heavy rate of interest.

But if you will use it effectively and smartly then you may find it very
useful and helpful. These days most of the banks are offering free
life-time cards with no annual fees and any other fees except interest
charges or late payment fee and by that only these banks are earning.
And these charges alone can make your life miserable. So always pay-off
your complete monthly bill on time to avoid these charges and use these
privileged services.

Credit cards are supposed to serve you, not the other way around.

For this what you have to do is to spend some time to understand the
terms of your card in order to be a smarter user of credit card. Also
carefully read each month's statement, as companies certainly do
make mistakes. Also, you need to make sure that no unapproved
charges have been made. In case you find something wrong in the
statement, immediately call the customer care and ask for the reason.
If you got satisfied, its good otherwise simply ask them or request them
to revert back those charges in the current bill only and make the
payment for the verified amount only.

These days credit cards have become necessity if you want to book
any flight ticket online, as they accept only credit cards. So its must
for you to have a credit card to enjoy the benefits of some online services.
Also there are some sites which offer some discount on online bookings
and some deals on other products. But do it wisely and don’t get much
lured by these offers as it isn't a gateway to free money and you will have
to repay it eventually.

It is very important to know the difference between your needs and your
wants. “Do I really need this?” is an important question to ask before you
dash to the checkout counter.

Also keep in mind to protect your card and keep it secure and just don’t
it anywhere in the house and try to memorize the pin numbers and
CVV number. Also a thief doesn’t need your actual card to make
unauthorized purchases on your account. All he needs is your account
number and your card’s expiration date. That’s why it’s important to take
all receipts and carbons home with you, especially from places like
automated teller machines (ATMs), supermarkets.

Those who pay up the entire amount in full within the interest-free time
period are called transactors. Transactors only transact on the credit
card and do not utilize it as credit instrument. So now the question
arises from where bank gets the money?
When a person uses credit card to shop or pay hotel bills, the companies
charge a discount fee. For example, if you spend Rs 100, the credit card
companies pay some less amount to the merchant where you have
shopped and charge 0.5 to 1% as fee from the merchant. The other way
the companies make profits is from the interest charged from customers
who don't give back the credit within the specified due date or revolve
credit or use credit card as an overdraft. So the merchant discount fee
and income from interest are the two main income sources for the
credit card companies.

Also there are some other features of credit cards like ‘balance transfer’.
The balance transfer carries very low interest rate for three to six months.
So if you have the ability to pay in 3-6 months, opt for balance transfer.
But if you have to repay over a long period of time like 12, 24 or
36 months, it is better to raise a personal loan. But balance transfer is
useful only if you hold more than one credit card. You can pay-off the bill
of one card using another card.

Cash advance feature on credit cards is supposed to be used only in
emergencies. It is not like withdrawing money from ATM or your account.
You don't have any interest free period on withdrawal of cash like in case
of purchases. Interest meter starts from the first day.

So you must be aware of different finance charges that can include
service fees, transaction fees, or premiums paid for optional services
such as credit card insurance or life insurance.

If you will understand the use of credit card and how to use it properly
then you can even save some money or get it increased in your savings
account in the form of interest. Just what you have to do is to be aware
of your paying capacity before you make any transaction. And you may
be happy always.

1 comment:

Unknown said...

Another nice and informative article!!!