MUMBAI: If you use your credit card wisely, it can turn into a useful tool for your money management. However, many consider credit card as a bad financial product to have in your wallet. If you are new to use a credit card or if you are considering opting for one, here are three basic things you should know:
MAKE USE OF YOUR CARD’S GRACE PERIOD
All credit cards come with a grace period to pay the bill. Grace period is the time given to you to pay back the money you spent using the credit card, without paying an interest.
Usually credit cards come with 50 days grace period. For instance, if your billing cycle starts on the 11th of every month, your due date will be 50 days—which is 30th of the next month.
Hence, if you make a purchase at the 11th of the month you will get the entire 50 days’ grace period to pay the bill. Paying bills on or before the due date means you don’t have to pay any interest. Also when you are disciplined with your credit card bill payment, you will see a positive impact on your credit score and credit history.
DON’T WITHDRAW CASH USING A CREDIT CARD
One of the most expensive ways to use your credit card is to withdraw cash from the automated teller machine (ATM). Don’t use your credit card like your debit card. Here your interest rate kicks in as soon as you withdraw money from the ATM. Unlike when you swipe your card and get a grace period, the ATM withdrawal doesn’t have a grace period.
Hence, avoid using credit cards for cash withdrawals. Usually the limit on ATM withdrawals is lower than the credit card limit.
READ ALL THE CHARGES
Usually all credit cards have charges such as annual fee, joining fee and late payment charges. Most credit cards have similar structure. However, the charges can differ based on added services. Hence, you should compare the fees and understand the cost of the credit card before opting for one.
Also you should check the reward points and the value of it as it varies across the credit card platform. Some credit card companies waive off credit card fees completely too. You can also negotiate with the bank to bring down the cost.
When you start using a credit card make sure to not go overboard on spending. Also remember that if you don’t pay your bills on time, the interest rate is around 22-48% per annum, which is the highest in the market.