Hi, I am Vinay from Noida, 24 yrs old MBA in HR. I recently joined a MNC company in HR department and they have opened a salary account for me in a bank. The bank provides zero balance facility and bank has also offered to issue me a Credit Card. I have heard lot of horror stories on credit cards and would like to seek advice and tips on how to avoid problems and how to use the same smartly. Thanks
Expert Advice –
Firstly, best wishes for your new job and for your success. Though you have asked for suggestion for yourself on better usage of credit cards, the answer will suit anyone reading this article. Hence the answer is for you but I request everyone to read it carefully and get smart! Hence let me title the article as:
Be smart with Credit Cards
Credit Cards, otherwise called as Plastic Money is an Unavoidable Deadly Friend in today’s world. Deadly, if you don’t use it sensibly, and a great Friend if you follow simple steps, procedures in using it. Since there are many advantages as well, I am not going to ask you the question: if you really require a card? We all do!
1. Applying for a new card: Most banks have both free cards and chargeable cards now days. Some cards are free while applying and also free from any recurring charges. Some cards come with application fee but no recurring charges and the other category is fee while applying with an AMC every year!
The features and the credit limits differ in each category and their sub-categories!
As a first timer it is better to apply for the basic, all free card. The same can be upgraded later. Take a copy of the features while handing your application to the bank or its agent.
2. Credit Limit: If you are an impulsive shopper, it is better to have a card with lowest possible limit. Self control over expenses is the first requirement in safe usage of cards. Say if your limit is Rs.10000/- every time you hit the limit you can pay and then use again. This method controls your spends. Keep in mind having large limit is not something prestigious! You can be smart even with very low limit. You can always call the customer care and get your limit decreased.
3. Secondary Cards: Many banks offer secondary cards with the main card. Meaning a spouse can have the primary card and give the secondary card to the other partner, you can have the primary and give the secondary to your children. Remember in such cases the liability of entire spend is on the primary card holder!
4. PIN and Passwords: Now days as an added facility all cards come with mobile password facility for very transaction done online. Always keep the PIN and your passwords with you alone. Never ever share the same to anyone calling you even though at times they may say that they are calling from the bank! Remember banks don’t require your PIN so they will never ask you.
5. Payments: Always pay in full. The banks give you minimum payment facility but then you are charged hefty as interest rates! Certain cards charge you 3.5% per month as interest! That’s whooping 42% per year! This is the reason in the above point I asked you to keep the limit low so that you would spend within limits. Paying in full keeps your CIBIL score strong!
6. Cash Facility: Never avail this facility. It sounds good in case of emergencies but even if you take it, pay it immediately within the due dates.
7. Credit Transfer Facilities: Banks will offer you to transfer other card dues to their cards at No Charge! Just ask yourself are Banks fools? Hope you got the answer hence never avail this facility!
8. Always Remember the Statement Dates: Every card will have their own billing cycle dates! Say today is 10th of the month and your statement is prepared on 12th of every month, then you can very well wait for two days and then spend on the card! This way the bank funds you for almost 40 days! Then pay on time!
I have statement date written on every card of mine and always spend on the card which has farthest billing date! Actually banks lose every month due to me!
9. Be aware of all programs and benefits: Have you not seen shops offering special discounts to certain card holders? Every bank comes with unique offers! Know them and benefit out of them.
10. Spend only on Needs: Don’t spend just to avail an benefit! Avail the benefit when you are actually spending! Confused? I mean always spend on your Needs and not on Wants! Wants will always be there, just because a discount is running on a product, you need not go and buy it!
Cards are surely of immense use! You need not load your wallet and move around! Even if stolen the person may not be able to use it if you have activated the PIN. You just cannot avoid plastic ;)