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10 Reasons Why not to use Credit Cards
Browse Amazon, Flipkart, or eBay on your cellphone; flash your credit card on the shop; fill the tank of Enfield Classic with petrol, shut it and forget it after a swap of your card on the machine, and you have got the latest versions of your gadgets, trendy dresses, petrol or your any requirement of lifestyle living. Payment ? Not worried for the time being, say till the next credit card statement arrives in inbox. So? Easy, very easy!
- How to get a Credit Card against Fixed Deposit ?
- Know the Payment Options to Pay SBI Card Outstanding
Shopping, lending on Credit Card: Pay Early or be in a Trap !
You are mistaken or living in the world of fairytales. Banking institutions and the companies which issue credit cards to you are here to make quick buck, not for charity. They make you cough a number of hidden charges, besides making a trap of you in a vicious cycle of exorbitant rate of interest which cost you dearly and seems hard to come out of that. So, it is better you understand the fundamentals of buying through credit cards, go for rationale buying and avoid habit of impulsive buying.
Here are the fine prints of Credit Card buying :
- Credit Cards are issued to match the borrower’s capability of repaying the amount as per his or her source of income. If you do not pay the minimum amount due, by the last day of the payment, you will be charged a penalty, which may range Rs. 250 to Rs. 1000. You may attract the penalty even if the outstanding due is as meager as Rs. 50 only. So, you were being charged about 500 per cent of the penalty sometimes by some clever issuers who will refer to the fine prints and agreement, if you dare to object!
- If you miss the deadlines for the last payment, or not able to pay the amount by pay by date, the companies will charge you exorbitant rate of interest which may go to 36 per cent or much higher side. They can charge you per day, besides clubbing a certain part of penalty. It is the beginning of the vicious cycle of revolving debt for an unaware cardholder.
- Sometimes, you may not receive the current statement of outstanding payments, and so could not remember to deposit the minimum balance, which usually comes at 2.5 per cent of the total outstanding amount, you will be charged heavily, may be upto about 15 per cent of the outstanding amount. So, a good habit is that you better keep a note of last date of payment, set an alert on your mobile phone for at least one week advance and deposit the minimum amount due as per your estimate. You can also set standing instructions of the effect in your linked bank account. It is necessary because, according to approved guidelines, the credit card issuer institutions are entitled to charge the penalty on the whole outstanding amount on every single day basis as well as the due penalty charges accrued on you.
- Do not fall into trap of bonus points on frequent usage of your plastic money. They have devised so many preconditions in fine prints, that they hardly materialize to your benefits. When you think you have sufficient points to redeem with an unnecessary item like a wallet (that may be of no use to you), a cheap wristwatch, a goggles or a tie with trhe logo of the bank imprinted on it, you will be informed in the next cycle of bill that as per the policy of the bank, your accumulated points have been lapsed.
- Never agree to take a loan on your credit card. You may receive a number of calls from your issuers, that you are amongst the chosen lucky few, found eligible for a loan of Rs. 35000 to Rs. 1,50,000 due to your clean repayment track records. It is yet another trap by the banks. They charge higher rates of interest on the EMIs. Moreover, You cannot opt for prepayment to the outstanding amount in one or two go and the amount goes on piling with huge penalty if you default in an instalment.
- The convenience of revolving credit, which comes along with credit cards, does not outweigh its disadvantages. The most harmful disadvantage is the temptation of spending money—they money is is not available in your bank accounts. People buy first, plan later, thanks to the plastic money! Sometimes, they pay minimum amount due from withdrawing from the credit card’s cash overdraft facility, which even attract more penalty and leads to bad record or bad debt. You should feel alarmed, if you are facing such a situation and make out a suitable plan to eject yourself out of the financial mess.
- Another danger with the credit cards is that the bank can alter rate of interest and the terms and conditions of the usages to his advantages, which obviously is your disadvantage. The lender can change your limit and ask for more amount as a repayment for which you may not be prepared. If you default, your credit score goes into risk mode too which will affect your potential borrowing capacity .
- Credit Card companies or issuing financial institutions shy away from sharing resources of their instruments in public domain, i.e. on internet or in media. If you happen to search or browse the information on the websites of the banks, they ask for your details, contact numbers, email IDs etc. Then, they pass on this information to their franchisee or DSA. The representatives from DSA flood you with the calls to take one. When you try to elicit information about their schemes and finer points, they do not have many clues, because they are hardly trained to face the queries. They are not recruited by the banks, may be attached with the DSA as casual employees for a brief period and are not trained to be responsible, qualified or authorized to respond to you adequately. Even if some of them look smart enough, do not take their words on face value. Better you cross check their claims’ authenticity with the bank itself, before proceeding further.
- It is said that the loan against credit card makes you dearer very fast as compared to loan against Fixed Deposit, Gold, and Loan against your Securities or Personal Loan. It is a better strategy to chalk out a long term financial goal before applying a loan. Visualize the repayment plan in minute details before taking the loan into your account and adhere to it effectively.
- In any case, if you are keen on taking a credit card or a credit card loan, it is better to evaluate pros and cons of the issuer institutions. Read the terms and conditions and finer details exhaustively, make a chart of the schemes of various banks and then decide. Some PSU banks offer better services and lesser rate of interests than the private sector banks. Go for the bank, whose services looks better to you.
These were the 10 reasons why not to use Credit Cards. We hope that you keep these 10 reasons in mind before thinking of applying for a Credit Card.
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