‘Credit Card is not only your best friend but also your worst enemy’. In this age of digital transactions, can there be a better ally than your Credit Card? Yes, a Credit Card is a handy instrument provided you know how to use it.

Credit Cards are not new to India. In 1980, Central Bank of India was the first bank to issue Credit Cards in India. Aptly named Centralcard, they were valid in India and Nepal only. Subsequently, other banks followed suit. Today, all banks issue international Credit Cards.

What makes a Credit Card so useful?

Credit Cards are the best substitute for cash. There is no need for you to carry money when you can swipe your card and make the payment for the goods you purchase. You can buy products online using the card. In fact, the advantage of the card is that you can buy your things even without having any money in your account. Thus, a Credit Card is handy in an emergency. You can also withdraw cash using it. Therefore, you will never feel short of confidence when you have your card in your wallet.

Side Benefits of using your Credit Card

You get reward points whenever you use your Credit Card. You can accumulate these points and redeem them for beautiful gifts and discounts. Some Credit Cards give you mileage points whereas some provide you with fuel reward points. It depends on the type of card you have. Some cards allow you discounts at restaurants. Similarly, you have cards that will enable you to purchase goods at 0% interest. Therefore, as far as benefits on your Credit Cards are concerned, the sky is the limit. So, you can call the Credit Card as your best friend.

Is it easy to get a Credit Card?

Yes, it is! Banks compete with each other aggressively to issue Credit Cards to their customers. You can take advantage of various Credit Card Offers Online and apply for one. Banks look at your credit history and repayment record while dealing with your credit card application. A credit score of 700 and above should fetch you a credit card quickly.

There is no need for you to despair if you do not have a good credit score. Some banks issue Credit Cards against lien on fixed deposits with them. They take recourse to the deposits only when you default on your payments. Otherwise, they allow these cards to function as standard credit cards. It is a great way to improve your credit score with such a card.

How can the Credit Card become your worst enemy?

It is not about the type of card you have. It is how you use it that matters. Understand how the Credit Card concept works.

• Interest-free credit period – Banks approve a specific limit on each credit card depending on your credit history and income generation. Usually, banks generate the bills on the card on the 20th day of each month. These bills are payable by the 15th day of the subsequent month. Hence, you have a maximum of around 50 to 55 days of interest-free credit.

• Minimum amount due concept – In the ordinary course, you have to make the payment of the entire bill amount on or before the due date. However, banks give you an option of paying a minimum amount (around 5% of the total bill amount) to keep the card alive. You can pay any amount over and above the minimum amount due. It is known as the minimum due concept.

You should note these following points about the minimum due concept:

1. You should not pay any amount less than the minimum due amount.
2. In case you have EMIs (Equated Monthly Instalments) pending, banks add them to the minimum amount due during the billing operation.
3. Banks charge interest on the total amount outstanding and all new transactions until the time you pay the entire outstanding amounts.

How should you use the cards smartly?

• Understand the concept of interest-free credit and schedule your purchases just a day or two after the billing date. It will ensure that you get the maximum interest-free credit of 50 to 52 days.
• Always pay the entire amount outstanding on the credit card. Paying the minimum due amount every month will take an eternity for clearing the outstanding amounts.
• In case you have high outstanding balances, approach your bank to fix up EMIs. You will save a lot of interest in the bargain.
• Try for a balance transfer option. Banks offer such options at 0% interest for a specific period. If you can clear the outstanding within the period, you gain a lot.
• Be careful with your purchases. Restrain the urge to buy things that you do not need.

Smart management your credit card ensures that it remains your trusted friend forever. Otherwise, it does not take time to destroy your finances. Knowing this fact is very important for Credit Card users.

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Also Read : Make the most of your co-branded credit card

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