Loan Singh Explains – The ABC’s of Credit Cards And Its Facets



No, I do not intend to remind you of kindergarten. After successfully busting some myths this week, I thought we could mellow down a little and start with the basics. This piece discusses about 26 facets of Credit Cards. Without any further delay, let’s get on with it.


ABC’s of Credit Cards

Alerts for your Credit Cards help avoid fraud

Ensure that you subscribe to mobile and email alerts from your credit card issuer. In case your card is lost or stolen, the alerts will let you know about any fraudulent transactions being done.


Default on credit card bill payment can damage your credit Bureau score

Make maximum efforts to improve your credit bureau score by paying your credit card bill on time. Banks and digital lending platforms like Loan Singh will look at your credit bureau score before approving a personal loan.


Closing a credit card reduces your repayment history. So be wise in doing so!

A shortened repayment history could hamper your chances of getting a personal loan. This is because banks and digital lending platforms prefer longer track record of a borrower.


You could get into Debt if you pay just the minimum payment

An example of credit card debt is when you make purchases using your credit card and fail to make the complete credit card bill payments on time. As the remaining balance piles up, you struggle to pay them back due to either lack of savings or other financial requirements.


Credit cards cover you in times of Emergency, but remember to re-pay on time

An advantage of having a credit card is that you are always covered in case of emergencies. It is fine to use it for one big expense but remember to pay it off on time.


Fees for over dues, bounced cheques, service tax and more

Understand the bevy of charges, related to credit card, which include fees such as joining, annual, duplicate statement, loss of card, credit limit, foreign exchange transaction, cheque bounce, service tax, overdue of bill payment, etc.


Have a Good reason to increase your credit card limit.

Ensure that any increase in credit limit is necessary, and not just for the sake of luxury expense. If you have been prompt with your payments, only then can you apply for an increase in the credit card limit. So, have a good reason and a good repayment history.


Easily get a new credit card with a good repayment History

Credit card issuing companies look at your credit bureau score to gauge how prompt you have been in your past repayments of credit. They also look at your income and average daily balance, to proceed with a new card approval.

Watch out for high Interest rates levied on your credit card

In case you violate your credit card’s terms and conditions or make late monthly payments, you will be penalized with high interest rates. The best way to avoid them is to be prompt with your payments, and understand the terms and conditions well before starting to use the card.


Juggle multiple credit cards smartly

Keep your credit card spending under control. The more credit cards you apply for, the more credit score inquiries will be requested by the card issuers. This will reduce your credit bureau score.


Keep your credit card bill statements and receipts handy

There are many advantages of keeping your receipts and statements handy. It can help you to check for errors in your bureau report, and control your budget better.


The maximum outstanding balance on your credit card is your credit Limit

The credit limit is the maximum outstanding balance that you can hold on your credit card, without incurring any penalty. In case you overshoot this limit, you will be penalized. To know what your credit limit is, check your billing statement or give a call to the customer service department of the card issuer.


A healthy credit Mix of unsecured and secured loans gets you a new credit card faster

If your credit history indicates a strong mix of secured (home, vehicle) and unsecured (personal loan, credit card) credit, then it gets easier for the card issuing companies to approve your new card application.


Strive to ensure that there is No pending balance on your credit card

Only when you leave no pending balance in your card, can you get a go-ahead to close it. You can pay off the balance in lump sum or via installments, as per your convenience. Speak to the customer care executive of the card issuing company to know the balance amount and the inclusive charges.


Beware of risky and unsecure websites while doing Online card transactions

Make sure you do online credit card transactions only via secured and encrypted (SSL) websites. Online fraud is a common practice nowadays with the onset of digital avenues.




Positive repayment history is guaranteed with timely credit card bill payments

Inculcate self-discipline to always be prompt with your bill payments. Set up auto debit facility so that the amount is directly debited from your account before the due date.


Every Query for a new credit card is a hard inquiry

When you apply for a new credit card, the card issuer will request for your credit bureau report. Every request is considered an ‘Inquiry’. Each inquiry reduces your credit bureau score by some points. So, ensure you have a good income and strong credit score before applying for a new credit card.


Look for a credit card that offers Reward points

Reward points are offered by credit card companies to encourage more and regular use of credit cards. You can make use of reward points to shop, and convert points into air miles to buy flight tickets.


Supplementary credit cards are perfect for spouse and parents.

They are cards issued on the primary cardholder’s name. The credit limits for these cards are less compared to the primary card. Based on the terms and conditions, any family member can avail a supplementary credit card.


Tracking all your expenses will keep your average daily balance in check

Knowing what purchases you make with your credit card, helps you to differentiate essential & exorbitant expenses. If you can keep the expenses within the credit limit, then you can avoid defaults and penalties.


The lower your credit Utilization, the better!

It is the ratio of the amount you spend and the total spending limit. The ideal credit utilization ratio is 30%. Your credit bureau score has a positive impact if your ratio is inside the ideal 30%.


Virtual credit card! A safer option while shopping online

A virtual credit card is a 16 digit number with an expiry date, credit limit and CVV number. It is linked to your primary credit card. To avoid online fraud, you can make use of a virtual credit card. Its validity ranges between 24-48 hours. You don’t need to share your primary card details online, making it a safer option.


Watch out for the grace period. Don’t rely on it but use it only as a buffer

A good practice is to pay-off the outstanding balance before the due-date. Paying the balance during the grace period won’t incur any charges; if paid later, could lead to interest being levied.


X (cross) out the errors on your credit bureau report

If gone unchecked, errors in your credit bureau report can hamper your new credit card application. Some of the errors could be personal information, contact information, wrong number of inquiries, credit based errors, etc.


Ask Yourself why you need a credit card in the first place? Get one only if it’s manageable

In case you are someone who is too lax when it comes to your credit repayments, cannot keep a stable budget and are an impulsive spendthrift, then getting a credit card would not be a good idea. You wouldn’t want to bear a credit card debt.


Zero fee balance transfer credit cards

Some credit card issuing companies offer a balance transfer credit card, with 0% interest rate, for the initial 2-3 months. The balance transfer allows a cardholder to transfer his/her outstanding balance to another card (of a different card issuing company).


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