Credit cards are lovely. They give us the freedom to experience things without stressing too much about the money aspect of it. Credit cards really help us out, whether it's buying the awesome television we always dreamed of or taking that vacation we longed for.
But the convenience it offers also aids in clouding our judgement. Acting as a safety net for our desires in life, credit cards are also big time trouble makers. It is like a honey-trap that often lands us in situations we try our best to avoid.
Here are some really helpful credit card hacks that'll help you walk the fine line without unknowingly tipping over to the dark side of greedy banks.1. Late bill payments
It is, of course, better than not paying your bill at all, but not a lot. Two things happen when you pay your bills late. You are levied a penalty worth a substantial amount, most often costing more than your minimum payment amount. Secondly, not paying up on time affects your credit score, which might not be a problem now, but will be a big problem when you apply for loans of a large sum, like a house loan or car loan.
2. Making minimum payments
Banks do give you the option of paying a nominal sum as a 'minimum payment' on your purchase every month but it's not something you should fall for. The interest that banks charge on your outstanding amount is quite high, and if you keep paying just the minimum amount, you would end up shelling out a lot more as interest. Many times even more than the actual value of the product. So best practice would be to save by cutting costs on other things and pay as much of the bill as you can. Remember, more the amount, more the interest.
3. Some of us get way too many cards
Credit cards are a boon when in need. But the greedy bunch that we are, we always 'need' more. Which is great for the banks, but definitely not for us. It is simple logic, more credit cards means more spending, more spending means deeper debt. Additionally, it also affects your credit score and the annual fees also adds to your expenditure. Having one card is ideal because it's much easier to track with all your expenses in one place. Credit is not an added income so getting another card when you max out your limit on one is not the solution. It'll only make things worse.
4. Using a credit card for everyday items
Until and unless you're caught in a massive shitstorm in life, you should be able to pay for your basic necessities with your monthly salary. Using your cards for purposes like buying groceries and paying off utility bills is often the first step of losing control of your spending. You don't wish to make the Rs 100 you spent buying vegetables cost you Rs 1000 with interest, do you? Not using your card will also help in keeping your expenses under control. Keep your cards for a purchase that you perhaps don't wish to make with the money you have. Like buying electronics or getting flight and hotel tickets.
5. Ignore the T&Cs
Scratch that. In fact, never ignore the T&Cs of card companies. Actually, never ignore the T&Cs of anything that involves money because more often than not, the devil is in the detail. Most often, we only end up signing for additionals we didn't know and definitely didn't need. So make sure you read all the documents thoroughly, even twice for that matter, just so it doesn't backfire at a later stage.
6. Exceed your credit limit
It's self-explanatory really. Like mentioned before, a big amount means a bigger interest rate. So never bite off more than you can chew.
7. Ignoring monthly statements
Never, ever ignore your monthly statements. Not knowing how much you owe to the bank can very quickly land you in a lot of trouble. Be aware of your monthly statements to know where and what you're spending on, if you're being charged for something you didn't purchase, and to keep a check on your budget. It is always important to know where you stand and the monthly statements will help you get a grip on things.
8. Using card to withdraw cash
This is the worst of the lot. A number of people still use their credit cards as debit cards to withdraw cash from the ATM. Any cash withdrawn from the ATM is considered 'cash advance' by the banks. It's considered more like a short term loan. A loan doesn't come without interest and cash withdrawals attract a mammoth interest rate. So don't even think of touching your credit card at an ATM unless it's a matter of life and death. Stick to your debit cards otherwise.
9. Thinking foreign transactions are the same as domestic ones
Each bank has different exchange and transaction rate. So before you make a transaction while traveling abroad, make sure you check and use the card that gives you the best rates.
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Posted by: Fereshteh Jamshidi <fayjay81@yahoo.com>
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