-High bankruptcy rates, increased credit card debt, and identity theft make it imperative that all of us take an active role in providing financial and economic education during all stages of one's life-- Ruben Hinojosa
Credit card is a plastic card designed for the purpose of payment. A customer can buy goods and services without having cash in hand. It allows the user to borrow money for payment to a merchant or cash advance to the user. Credit card concept was introduced in the year 1887 by Edward Bellamy in his novel Looking Backward. The modern credit card was introduced in 1920, in the United States to sell fuel to more number of automobile users. Credit limits are determined on individual basis.
The following can be useful for the valid use of a credit card:
- Signup Bonuses
- Investment Rewards
- Grace Period
- Building Credit
The below tips can be useful for the effective usage of credit cards:
- Pay your credit card bills on time: Paying the credit bills on time helps you enhance your credit rating. Pay at least minimum amount or send a mail to the company to allow time for the payment.
-Pay off your balance amount in a single payment: Paying the balance amount in a single attempt can save your money and interest charges.
- Reduce your spending if you are unable to pay your credit: Have an analysis of your earnings and spending in a critical way. A proper budgeting can save your money in the way of escaping interest charges.
- Check your statement carefully each month: Review your statement carefully. Make sure that your statement is not showing any unspent or unexpected charges.
- Transfer your balance to a card with a lower interest rate: If you have two or more credit cards with outstanding balances, consider moving the outstanding balances to the card with the lowest interest rate.
- Negotiate for a lower rate with your credit card company: If you have a good credit history, you are a valuable asset to your credit card company. Call them and seek ways to lower your interest rate. If the interest rate you are currently paying is very high, you may cancel the card and go with another competitor unless they adjust your rate downward.
Below rights and responsibilities should be adopted by a credit card user:
- Prompt Credit for Payment
- Refunds of Credit Balances.
- Errors on Your Bill
- To dispute a charge Write to the issuer at the address indicated on your statement for billing inquiries.
- Include your name, address, account number, and a description of the error. Send your letter as soon as possible. It must reach the issuer within 60 days after the issuer mailed you the first bill with the error
Every credit card will be having a credit limit on the amount you can spend. Spending beyond that limit will lead to rejected state when you use it the next time. Some cards may allow you to spend over your limit. But make sure about the rules and regulations of penalties and extra charges before you do so. If you spend more than the credit limit you may be penalized with extra charges. If you prove that you can use credit cards responsibly, then you can increase your credit limit. If your limit is too high and you are not able to repay then it's wise to inform your issuer. When you are not able to pay your installments the interest will be added on unsettled balance and it has to be cleared at the end of each month. If you pay in advance or in time it avoids you paying interest on the amount you borrowed.
Apply college student credit card from any nationalized Indian bank. Basically it is that the students parent will go for an add-on credit card having the student's name printed on the card. However, the billing address will be of the parents in case the student is living away from home. Make sure that you are well known of the current interest rates of various credit cards.
The below points are to be considered before taking a student credit card:
- Interest rates applicable to your card as they are pretty much high on college student credit cards
- Monthly or periodical repayment options and amount to be paid. Better to fix a low repayment method to pay easily.
- Credit limit offered to your card. Better to choose a low credit level so you can limit your expenditure to that level.
- Check if your city has the facility as not all the cities have got this option to provide a credit card.
- Choice of bank may be subjective to the availability of the options and terms and conditions in terms of interest rate and repayment norms.
The below signs shows that you are into too much debt:
1. If you spend more than 20 percent of your paycheck to pay off car loans, credit cards, or other types of consumer debt.
2. If you are borrowing to pay off other debts.
3. If you do not know how much money you have taken loan from.
4. If you make only the minimum payment on each bill.
5. If you miss payments or you pay your bills late every month.
6. If creditors are calling.
7. If people or stores refuse to give you credit.
8. If you borrow from retirement accounts or use credit cards to pay normal monthly bills.
9. If you were overdrawn in your checking account more than three times in the last year.
10. If you must take an extra job just to keep up with paying your bills.
If we follow the below steps in an appropriate way, the credit card usage can be reduced:
- Reduce your unnessacary expenses. Make sure whether that particular item is necessary to buy or not.
- Try to increase your income. Is it possible to get a second job or get paid overtime and use the money to reduce debt?
- Consolidate loans. Shift higher-interest loans to a single lower-rate loan and stop running up new charges.
- Maintain only 2 or 3 major credit cards.
- Use only one or two cards.
- Keep a track of what you spend and always maintain a track record of spending amount.
- Use credit cards only as a final source.
- Always pay more than the minimum balance due. If at all possible, pay off the entire balance each month.
- If the balance begins to increase, don't use the card for a while.
- If the balance continues to increase, avoid carrying the card.
- Use credit card with a low interest rate and/or a low annual fee or without annual fee. Shop around on the Internet or through offers sent to you in the mail.
- Pay attention to the minimum payment disclosures on your credit card statements. The disclosures will tell you how much time you have to pay off your credit card balance within the amount due.
Below tips assure your credit card safety:
- Never lend your card to anyone.
- Never sign a blank charge slip. Draw lines through blank spaces on charge slips above the total so no one can change the amount.
- Never put your account number outside of an envelope.
- Make sure before disclosing the account details over telephone or online unless you know the person or website you're dealing with is the representative of the company.
- Keep your receipts so you can reconcile the charges on your bill.
- Keep a record in a safe place separate from your cards of your account numbers, expiration dates, and phone numbers of each creditor to report a loss quickly.
- Don't forget to sign on your card when you receive it immediately
- Don't forget to carry your cards other than valet and carry in a zippered compartment, a business card holder, or another small pouch.
- Maintain a proper record of your account numbers, their expiration dates, phone number and address of each company in a secured place.
- Be conscious and keep an eye on your credit card transactions.
- Cancel the incorrect receipts.
- Don't forget to save the receipts to compare with bills for future reference.
- Don't forget to write to the card issuer, if you observe that you have been imposed any additional charges.
- Don't forget to inform your card companies in advance of a change in address.
- Never lend your card(s) to anybody.
- Never leave your cards or receipts.
- Never sign a blank receipt. Make sure that, you observe well the blank spaces and sign a receipt.
- Write your account number on a postcard or the outside of an envelope.
- Never contact a company to give account details over the phone unless the company is reputable. If you have further concerns contact the customer care officer of the company for clarifications.
If you find that your card has been lost or stolen, immediately call the card issuer(s). Many credit card companies have their own customer care toll-free numbers and 24-hour service to deal with such emergencies. When you report the loss or theft of a card you are not authorized for any unauthorized charges as per the law.
The below myths and facts are widespread about credit cards in the market:
Myth1: The credit card companies set your score
Fact 1: This is not true. Credit card companies never set a person's score.
Myth 2: Canceling credit cards don't need to increase your score
Fact 2: Canceling cards may create negative impact on your credit in two ways as it eliminates a source of credit in your name and will increase your debt to credit ratio.
Myth 3: Asking for credit limit increases hurts your score
Fact 3: If you receive more credit score and if you don't use it, that may hurt your credit score.
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