Use Credit Card Wisely 2 - EMI, minimum payment and interest rates

While using credit card To avoid distress at a later date, the below points may prove helpful.

If used wisely, a credit card can provide convenience and allow you to make purchases with out money.

You should use your credit card as a payment option and not as a source of financing. Don't use your credit card as a substitute for cash

Don't use your credit card to buy things you can't afford. If you can't afford a purchase today, most probably you won't beable to afford it next month.

1. Understanding need and want

Need is used to describe something you wanted badly. Using credit card responsibly means, recognizing which things you need and which you just want. Many consumers are unable to take advantage of benefits of credit card because they carry a balance from month to month. Bad name about credit cards are related to hidden expenses.

2. Minimum payment

The minimum amount that you must pay for purchases done in that month so as not to attract penalty for default on payment of dues is minimum payment. Making only the minimum payment each month increases the amount of interest. So pay as much as you can on balance each month.

3. Payment by EMI

When you make a large purchase you may get an offer from the bank to opt to pay through the EMI facility. Give EMI a miss and, make the payment before the due date in one go.

4. Borrowing cash is expensive

Credit cards can be used for borrowing cash, which is not a very good idea. Bank charges around 2 to 2.5% of the amount withdrawn.The interest on that amount also starts immediately. The interest rates are also quite high, roughly around 34% including service tax. If you won't be able to make your monthly payment on time, let your creditor know in advance. Most creditors will assist you if you let them know before you miss your payment. They may even waive any late fees.

Setup sms alerts for all transactions above Rs. 1000/- .You can do this by logging to their website or by call center.

Keep a lower credit limit even though your bank allows you more.

Keep record of the signed charge-slip and check it on receiving your monthly statement.

Buying on a credit card is okay till the time you pay your bills religiously. Or else it will prove very very expensive.