Wednesday, June 22, 2011

Credit Card Usage

How To Use Your Credit Card Wisely.

A credit card gives one the license to make payments, without the hassle of carrying wads of cash at their disposal. It simplifies the burden of carrying physical cash in other words. But, Do you know it can also be a proverbial pain in the @#!

Today's topic dwells on how we can make sure the above statement doesn't come to fruition. Here are a few ways whereby we can minimize, or simply put to use our credit card more wisely.

Get to know all of the responsibilities in owning a credit card. Think very carefully before you decide to get your first card. Is a credit card or borrowing money really necessary, or would another option work just as well?

If you are under 21 and you receive a credit card offer in the mail, do not feel obligated to accept it. Law does not permit companies to market credit cards to people less than 21 years of age unless you have a co-signer or have submitted evidence of your ability to make the payments.

Choose wisely. When selecting a credit card, be aware of all of the interest rate and repayment options. Compare different cards based on your needs and your ability to pay all purchases in full.

Low or no annual fees, which issuers might charge: If the issuer charges an annual fee, ask them to waive it, or do not accept the credit card.

All other charges (late payment fees, transaction fees, over the limit fees, etc.): These can add to the total cost of your charges.

Grace periods: Some credit cards charge interest from the day you make charges on your account. Other cards offer a grace period for you to pay your balance before interest begins to accrue.

Credit limits: In order to maintain reasonable payments, keep your credit limit low (consider a limit of Rs 10,000 or less).

Services and features, such as cash rebates, frequent flyer miles, extended warrantees, convenience checks, etc.: There may be consequences for the true cost of these programs, especially when you consider interest and other charges.

Limit the number of cards you get. Having one credit card will help you manage your spending.

Opt out of interest rate increases. You can “opt out” of any interest rate increase and continue to pay off your balance at the current rate for up to five years. However, you may not charge anything more on that card.

Don't spend more than you can afford to pay on a monthly basis. Responsible use of your credit cards will help you establish a solid credit rating and avoid financial problems.

Keep track of your spending. It is important to monitor more often than once per month when you receive your statement.

- Check your account online frequently
- Save receipts and keep accurate records
- Maintain a ledger

Consider signing up for balance notices and billing statement notifications from your credit card provider.

Opt out of receiving credit offers, ending the number of prescreened offers for credit you receive. Opting out might reduce temptation to apply for credit you don’t need.

Keep an accurate record of the following in case your card is lost or stolen. Keep the information in a secure, safe place at home:

- Account number
- Issuer’s name
- Phone number
- Photo copy of the front and back of the card

Don’t be afraid to negotiate terms. Ask your creditor to change the contract terms and rates. For example, if you receive a notice of a rate increase, contact the credit and ask to negotiate the rate lower.

Close a credit card account correctly. Part of your credit score is based on the length of your credit. If you choose to close your credit card, notify the issuer via registered letter and keep a copy of the letter for yourself. (If you cancel a credit card over the phone, it could reduce your credit score 20-30 points.) By documenting your request, you have proof that you chose to close the account, not the issuer (for example, due to bad credit).

Remember a credit card holder should use his/her card sensibly. You don't want to default on your payments now, do you? That will only leave you with bad credit!

Think Wise, Act Smart!

No comments: