Introduction
2018 brings us new challenges, milestones and resolutions (unless you are still carrying forward some from 2017 or 2016 even). The year gone by also saw a number of financial news take center stage – Bitcoin, UPI, BHIM, Aadhaar, digital payments, Airtel’s Online Store, etc.
Credit Cards, although slipped underneath the radar, continue to be a well-used appendage of unsecured credit. Similar to its cousin ‘Personal Loan’, both unsecured forms of credit depend on a good credit bureau score. Loan Singh’s post today will focus on 3 credit card usage tips – which are dependent on the cornerstones of discipline and promptness. We also look back on how many of you actually applied for a personal loan instead of spending heavy via your Credit Card.
Credit Card Usage
December saw many of us take-off to trips abroad, road trip of scenic Goa, ring in the New Year at a suburban party, etc. Loan Singh’s digital lending platform allows salaried individuals to apply for an online personal loan for a number of purposes such as upgrading your home, purchasing gifts for Christmas (or New Year), spending for a trip abroad or starting the New Year with the purchase of a second hand car.
An online personal loan for spending towards New Year celebrations was any day a better option compared to burning a hole through your Credit Card. Our post today is focused towards salaried individuals who have availed an online personal loan already from Loan Singh, and also happen to own a Credit Card. Many of you planned your expenses well during the festive period of December. Many of you applied for an online personal loan much in advance so that the month of December could be used for planning your travel and shopping.
Credit card companies make use of the festive period to lay out a plethora of offerings and discounts for their customers. Along with discounts, they also happen to promote reward points, cashbacks and easy EMI options. As a Credit Card user, you can avail exclusive discounted deals which are limited to a particular retailer or bank. Lucrative cashback offers and reward point schemes make purchasing of products more alluring. Spending via a Credit Card also helps you to accumulate reward points to avail offers at a later stage.
Credit Card Charges
Credit Card charges cannot be avoided and is the only way by which Credit Card providers can make money. Let’s look at some Credit Card charges before we get on to the tips.
Annual charges
Credit card companies charge a joining fee when issuing a card. Sometimes, credit card companies may exempt you from paying an annual fee for a particular period – normally it is the first 12 months. Some offer a ‘Lifetime Card’ which bears no annual fee. Approximate charges, of joining fees, are between Rs.1000 to 3000 – depending on the type of credit card. Sometimes on request, the banks or credit card companies may waive-off annual fees based on your monthly spends.
Credit limit
You can spend money on your credit card only up to a pre-set limit. The limit is set by the credit card issuing company and depends upon your income and credit repayment history.
Credit Card statement
A monthly credit card statement is generated for the cardholder which details all the transactions made using the card. The statement also shows the pending credit card balance, payment due date, minimum amount payable, and other important details.
Duplicate statement or loss charges
The monthly statement is delivered free of cost to your email ID. But, physical delivery of the card statement’s hard copy is charged. In case your credit card is lost, you need to pay for a replacement credit card. Even withdrawal from an ATM using your credit card against the credit limit invites a charge. These charges differ between companies.
Outstanding balance
If you do not pay-off any of the outstanding balance in full each month, then an interest is levied on the remaining amount. The interest amount varies from company to company. If you do pay it, no interest is charged.
Minimum amount
You have to pay a minimum due amount for each billing cycle. This is usually 5% of the outstanding balance. If you continue to pay this minimum amount, your credit will not cease to operate.
Bounced cheque
If you make the payment towards your credit card bill via cheque and if the cheque bounces, a fixed rate is charged by the bank or issuing company. If the bank or credit card issuer sends an agent to collect the cheque from your physical address, then a fee is charged for that, as well.
Tax
The expenses you make via your credit card are subjected to tax. Tax is waived-off for an amount up to Rs.2,000
Late charges
Banks, or credit card companies, employ collection agents to retrieve outstanding amounts from defaulters. These charges are levied to make-up for the expense incurred by the bank or credit card issuer in collecting the outstanding amount. A late-payment fee can be either fixed or is a certain percentage of the minimum outstanding balance. The fee is usually levied 90 days after you fail to pay the minimum amount towards your card obligation.
Foreign currency transaction
In case you travel abroad and decide to spend the New Year there, that same transaction amount is converted to Indian rupees and a certain percentage of that value is charged by the bank or credit card issuer.
Credit Card Hacks
These tips will help you to be more prudent, organized and help you to keep an eye on your credit score.
Spend Wisely
Yes, the kitchen needs a modular upgrade. Yes, you want to deliver gifts to your loved ones in a second-hand car or get yourself a new iPhone. With an online personal loan, you can make most of the deals (and discounts) to be able to spend less and get what you want. This also allows you to save more which you can spend somewhere else. Have a list or a spending budget in place so that you don’t go on a haywire spending spree. Research products well before you make the purchase.
Credit Card limit spend
Keep your Credit Card spend at a minimum. Aim at spending only up to 40% of your credit limit. Don’t try to apply for a second Credit Card if you are struggling with the first card. This will lead to a double jeopardy of rejection along with a hit to your credit score.
Delayed repayments
This is easily the most important reason for a poor credit score. Ensure that you repay the EMIs and bills on time – each month. If you don’t know which sudden expenses could come-up next time, have some emergency funds in place. In case you have availed an online personal loan, set an auto-debit feature so that your EMIs are directly debited from your account.
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