Credit card terms and conditions, credit card kya hota hai | Credit card users should know these 10 important things, will avoid trouble, to be many benefits
Credit Card Terms (Photo – istock)
- Credit cards should be used responsibly.
- Disciplined usage improves credit history.
- You can also easily take the loan of your choice on the repayment terms.
There are many benefits of using a credit card. These cutting edge spending tools not only help you overcome the cash crunch in the short term but also bring you benefits like cashback, reward points, and special discounts etc. However, you must use them responsibly and also ensure that you pay off your total outstanding balance in the interest-free period during each billing cycle. Moreover, disciplined use of credit cards builds and improves your credit history, thereby securing your finances and allowing you to easily avail the loan of your choice in future with the best repayment terms. But, along with the disciplined use of credit cards, users have to take some precautions so that any fraud can be prevented and debt can be prevented from increasing. In this article, we will mention some important things that any credit card user should be aware of.
credit card credentials
The card number, expiry date, secret PIN, one-time password (OTP) and three-digit card verification value (CVV) number are critical to the security of your card and should not be shared with anyone other than transaction details. should be done.
Bill Generation Days and Monthly Deadlines
Typically, card users get an interest-free period of 50 days to clear their dues. Each credit card account is associated with an assigned day on which monthly bills and monthly deadlines for each payment cycle (typically 20 days after the bill generation day) are generated. Card users should be aware of these dates, as additional interest charges will be levied on the outstanding balance after the monthly deadline. Often the best option would be to give a standing instruction to your bank to auto-debit the dues on time.
E-commerce portals and applications often ask you to store your credit card details to facilitate future transactions. However, you should save your card only with reputed merchants who have a good security track record. Storing your card details with unknown online merchants may result in card fraud. You should create a strong password for the transaction and ensure that Two-Factor Authentication is enabled through OTP.
Withdrawing cash from an ATM with a credit card can be a simple convenience. But, remember that whenever you make a cash withdrawal using a credit card, a fee is levied, which is 2.5-3.0% of the amount withdrawn. Also, no interest-free period is provided in respect of this type of cash advance. So, it would be better to avoid this feature.
credit card limit
Every credit card has a pre-defined spending limit, beyond which users are not allowed to spend. This limit is decided after taking into account the income, job profile and credit history of the credit card users. However, you are advised to never use your entire credit card limit and spend only as per your repayment capacity, which is ideally your monthly spending budget on the card. In fact, you should spend only up to 30% of your credit card limit to keep any adverse effects on your credit card to a minimum. In addition, you should keep track of all your credit card transactions through receipts sent via email and SMS so that you can keep track of your actual spending and you should check your credit card statement regularly to ensure that any difference can be detected.
Most credit card issuers offer add-on (or supplementary) cards. These cards can be used by secondary users who may be family members who cannot get the card for themselves due to certain reasons. The primary cardholder is responsible for tracking and paying the outstanding amount. So, if you are looking to get an add-on card for your family, make sure that you keep track of their spending patterns so that you can avoid huge dues, and if the amount is due If the loan is not repaid on time, it will attract interest charges, late payment penalty and the debt will also increase, which will hurt your credit score.
pay full dues
Minimum outstanding balance is a payment option offered to credit card users by requiring them to pay a small amount—typically 5%—of the total card bill to avoid the penalty for late payment. But credit card companies continue to charge interest on the balance amount which is 3-4% every month and in some cases even higher. Also, if you pay the minimum balance amount after the monthly deadline, you may incur additional late payment fees. You also need to remember that if you pay only the minimum outstanding amount, you will no longer get the facility of interest-free period.
EMI schemes are also available on many credit cards that allow you to convert eligible large purchases into monthly installments which are added to your monthly balance. But before you avail this facility, you should get a clear idea about the charges, if any, associated with it. Also, you need to keep in mind that your credit card limit will be blocked equal to the amount of the product purchased on EMI, and this blocked limit will keep on reducing as you keep paying the EMI. In case of any default in EMI, you will be charged additional interest which will increase your total credit balance.
The credit card comes with a host of core benefits like cashback, reward points, air miles along with additional perks and privileges like complimentary airport lounge access, special discounts on hotel chains, etc., depending on the variant of the card. As a credit card user, ideally you should go for a card with the key benefits that align with your general spending pattern and budget for monthly spending on the card. Also, keep in mind the applicable riders like eligible transactions, cashback cap, reward point expiry date, etc. to maximize the benefits that you can get from your card.
Often an annual fee or membership fee is charged by credit card companies to keep the card account active. However, there are several card variants on which this fee is not charged. In addition, other variants with premium benefits charge an annual fee, but they also carry a pre-defined spending limit, and this charge is waived off if spent up to that limit.
Lastly, credit cards make a great product to encourage your regular spending and should ideally help you save more, not spend more. But, it is pertinent to re-emphasise here that they should be used in a very disciplined manner according to your repayment capacity so that you can avoid extra charges and do not fall into the debt trap.
(The author of this article is Adil Shetty, CEO, BankBazaar.com)
(Disclaimer: This information is being given on the basis of expert reports. Markets are subject to risks, so take your own advice before investing.) (This article is written for informational purposes only. It is for investment purposes only.) should not be construed as financial or other advice)
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