Credit Card- Use, Misuse and Precautions
June 17, 2017

What are the Basic features of a Credit Card?

A Credit Card is a plastic card issued by a financial institution like a bank. The credit card allows the holder to avail credit on behalf of the issuing authority. The payment to the seller is made on behalf of the customer by issuing Financial Institution.

The Credit Card holder pays back the Financial Institution on a regular basis or as per the Credit terms and conditions agreed upon.

What are the uses of a Credit Card?

With the importance being given to cashless transactions holding a Credit Card has become a norm.

A Credit Card can be used for a variety of financial transactions.

• It Can Be Used To Pay For Shopping In Merchant Outlets.
• For Fine Dining In Restaurants & Stay in Hotels.
• For Online Transactions.
• To Pay Utility Bills.
• Medical Expenses & Hospital Bills.
• To Buy Airline Or Railway Tickets
• Cash Withdrawal For Emergencies

What is the Credit Limit of a Credit Card?

The Credit Limit of a Credit Card is the amount of credit the card holder can avail on behalf of the issuer.

This limit is decided by the Financial Institution which has issued the Card. The maximum Limit or the amount of credit that can be availed on a Credit Card remains fixed till revised.

The Credit Limit is further segregated into the Credit Limit and Cash limit.

What is the Cash Limit of a Credit Card?

The Credit Card holder has the facility of withdrawing Cash with his/her Credit Card.
The Cash needed can be withdrawn from an ATM machine using the Credit Card pin.
The Cash Limit is up to 40% of the Total Credit Limit allowed. The Card holder needs to be aware that the interest of36% will be charged to the Credit Card account from the very day the amount is withdrawn.
There is no Credit Free Period available for the withdrawal of Cash with your Credit Card.

Method of payment to the Bank for expenditure on your Credit Card.

It is important to be conscious of the amount you are spending using your Credit Card.The usage of the Cash withdrawal facility should specially be restricted as the Interest on cash drawn starts from the day the cash is used.
The statement for the transactions, of the amount of Credit you have availed is generated after 30 days.

The 30 days start from the date on which on which you first swipe or use your credit card. This statement is then sent via email or physically posted to your address.

A grace period of 15 to 20 days is given to make the payment.This period of 35 to 40 days is known as the Credit Free Period.

Credit Card users are expected to pay their dues by or before the specified due date.Payment can be made via cheque or transferred digitally.

If one is not able to clear the total amount as reflected in the statement, the unpaid balance of the statement will then get transferred to the next Billing Cycle.

An interest rate of 36% per annum will be charged on the same.

If there is a financial constraint & the Card holder is not able to pay the total dues, then he should at least pay the Minimum Dues.

What does the term “Minimum Payment” mean?

The minimum payment as specified on the Credit Card statement is 5% of the total amount spent via the Credit Card. Paying this amount is mandatory.If this amount is not paid then late payment charges of 250/-will be charged on the next statement.

What Are The Repercussions Of Recycling Your Credit?

If the expenditure of your Credit Card are justified & expenses are planned then carrying forward the payment is legitimate. But if the usage has been beyond the pay back capacity, then the recycling of the payment amount you owe can have the following repercussions.

• An Interest rate of 36 % per annum will be charged on the total statement of the next billing cycle.
• If a minimum balance is being paid the principal amount due will remain the same as the amount paid will go towards the interest due. As a result the one can get into a vicious debt cycle.
• The CIBIL score of the will be impacted negatively.
• Eligibility to apply for any other financial product will be affected.
• Create Undue stress & burden for the Card holder.
• The only answer is to somehow arrange funds as a priority to clear the Credit Card Debt.

One option to clear the Credit Card Debt is to avail a Balance Transfer. To know more about a balance transfer, read our blog here.

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