Understanding the responsibility in Using Credit Cards

A Credit Card comes with its perks and convenience for users. However, if not handled properly, it can put you in some serious debt and impact your credit rating as well. The mantra is responsible use and knowing the rules of the game so that you can reap the most optimum benefit from its usage…

Words: Sangeeta S

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Credit Cards offer great ease in managing your finances and spending, offering extra credit to you for making your purchases without the inconvenience of carrying cash. However, over-dependence on plastic money and failing to repay your outstanding due can get you in deep trouble. You need to be careful and use it strategically so that it works to your advantage. Keeping certain points in mind can help you maximize your card usage and can work in your favour.

Timely Payments
Your credit card does not offer you a loan; it only gives you credit and you need to pay back in full in a certain time. It works on the principle of ‘buy now and pay later’ but it is important to pay the full amount in time. By doing this, you will avoid paying interest and late fees that will help your credit score to soar up. Missing your payment can get you in trouble with the Bank or Card Company. It is advisable to have a Credit Card only if you can pay your bills on time otherwise Credit Cards are not for you. Not paying your bills on time can call for penalties with very high rates of interest. Set up an automatic payment system or schedule a reminder but always pay your dues on time and never miss your billing dates.

Minimum Payment
The minimum payment is the minimum amount of money that you are required to pay on your Credit Card debt as calculated in your statement each month. You may feel happy that you need to pay a small amount but in the long run, your outstanding will keep increasing as the interest charges will keep adding. With a Credit Card, you get additional time to repay the amount spent so it is important to pay the full amount all at once or pay with heavy interest later. An alternative is to convert the remaining outstanding into EMI’s, as you save an additional charge and have a lower interest rate.

Cash on Credit Card
A Credit Card can be used to withdraw cash, but it is best avoided. When you withdraw cash using your Credit Card, you pay a higher rate of interest with no interest-free period. The interest starts as soon as the money is withdrawn with no grace period. When you use a Debit Card to withdraw money, you are using your own fund while with a Credit Card, it is a cash advance on your Credit Card. The feature of cash advances should only be used in case of any financial emergencies.

Card Security
Online card frauds are frequent and in abundance, so we need to be extra careful while using our Cards – be it credit or debit. You need to protect your PIN and CVV number. Be cautious when you use the card while shopping or in restaurants. When you hand over your card to the person behind the counter, ensure that it is not copied. Use only authorized and trusted sites while using the card for online shopping and make sure you use safe payment options for making online purchases. Never compromise with the security of your card.

Multiple Cards
Different cards are designed for different lifestyles, so choose the one most suitable for your requirements. There are cards designed for travellers, shoppers, online shoppers, frequent fliers etc. so there is no point in having a card that offers benefits that you never use.

Keeping multiple cards as per your requirement is a good idea. In fact, if you keep a gap of 12 to 15 days in the billing cycle of your cards, it will help you as you can use one card in the first half of the month and the other one in the second half. This way you can use the grace period of both the cards and extend the time between your actual swipe and the bill payment to 30-50 days.

Keep a Check
Check your statement every month. It will list all your expenses and in case there is a wrong billing or fraud, you will know immediately, and you can take action. Also, keep a check on your credit score given by the credit bureau. This will help you track all the information in your credit accounts.

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Safety Tips at a Glance
• Sign on the reverse of the card immediately on receipt; unsigned cards can be misused
• If you lose your card, block it immediately and even make a report in the police station
• Always use a secure site while doing any online transaction; look for a lock icon in the status bar of your web browser
• Avoid using your card on suspicious websites or apps; read reviews of a website or app before making a purchase
• Shopping on your own device and on your home server is the safest way; public machines and networks are best avoided
• Never respond to phishing e-mails and don’t click on suspicious links
• Avoid accessing your Internet banking account on unsecured public computers and always remember to log off
• Get yourself enrolled for 3D Secure (Verified by Visa (VBV)/ MasterCard Secure Code (MCSC))
• ‘High-risk’ countries have a track record of many fraudulent activities; get your card replaced if you have used your card in such countries
• Make sure that the card you get back after any transaction is yours only; often cards get exchanged in shops and crowded locations
• Always get your cards swiped in your presence so that the details of your card are not captured anywhere
• Always cut the card in 4 pieces diagonally across magnetic stripe while discarding
• Never give a photocopy of the back of your card to anyone for any reason
• Change your PIN frequently and use a strong one
• If you are a regular online shopper, it is a good idea to keep a separate dedicated card with a small credit limit
• Review your statements thoroughly and never ignore alerts
• Always keep your information current; any change in contact details should be notified to the bank so that your information doesn’t reach the wrong hands
• Keep your system updated with most up-to-date security features