Credit cards can be of great convenience to people. At the same time, those cards can really make your life miserable if one doesn't go through the important terms and conditions. A credit card in your hand doesn't mean an extra income to you. It's just a way to make things simpler and better for you. The good or bad experience you get from credit card depends on how you use it. Here's some important tip as to how to use credit card judiciously.
Every bank before they give you a credit card, takes your personal account number (PAN). Don't think that they use it only as a photo identity. There's a bureau in India, which records your PAN number and judges your financial score based on the track record. Credit Information Bureau (India) Limited or CIBIL was founded in 2000. Since then it had been of a great use to banks and loan providers to roughly tell whether a person is eligible for the loan or not by the way of score. As said, these scores will be based on the track records.
So, once you get your card, all the transactions/payments/defaults will be closely monitored by CIBIL. Therefore, you should never ever delay the payment of your credit card bill. Yes, you will definitely be on a safe land if you pay the minimum amount due. But, wait there, there's something still to worry. Not paying the full outstanding amount will make your card attract interests rates even on the fresh purchases. So, if you have some debit balance on your credit card, even if you swipe your plastic card for a few hundred bucks and pay it in less than a week, you would attract the interest.
Another important point any credit card user should keep in mind is cash advance terms and conditions. Unless specified, all credit card companies charge you a minimum of 2.5 per cent on the cash withdrawn as service charge. Apart from this, there would be no interest free periods for cash advance on cards and interest rates would usually be more than three per cent. So, withdrawing money with your credit card should be avoided for general purposes. However, it's not a bane either. You don't have to wait for your salary if you to pay credit card bills. With cash advance, you can do that but you should pay the money back as soon as possible in order to avoid running into debts.
Never go for two or more cards. It will really effect your CIBIL score. Also, it would give a bad impression on loan providers since it would tag you as 'credit hungry' person. In fact, never apply for too many credit cards at one point of time. The last and most important thing is to resist yourself. You may have two lakh rupees of credit while your monthly net take home will be 40,000 rupees. What will happen when you spend four times of your monthly income? You will then undoubtedly slip into debts royally. Therefore, never pick whatever you find in the display of the shops next to roads only because you can buy them without the need of shelling out money right away. When used properly credit cards can really be so much of help to you. Follow these simple principles and make your life beautiful.
(AW Phani)
