PERSONAL/ FINANCE SPECIAL...CREDIT/DEBIT CARDS

 CREDIT/DEBIT CARDS

How to use your card effectively

Credit and debit cards have replaced cash and have only benefitted in making life easy especially with day to day activities like paying mobile or electricity bills etc through online transactions

    Actual story begins here: Buying a gadget, paying insurance premium and paying your electricity bill has one thing in common – All of them can be easily done through your credit card. Its sibling—debit card—does almost the same. Here are some tips to use them effectively:
Choose the right card: Rajiv Raj, cofounder of CreditVidya explains “There are factors such as interest rate (APR), reward points, finance charges, credit limits, grace period etc which defer from bank to bank. So it is necessary that you do proper research on them before you finalise your card.” Credit cards come in two forms - reward cards and cash back cards. A reward card is one that gives you points on each purchase and a cash back card is one that offers you cash discounts on bills payable. If you are dining out in upmarket restaurants frequently, you should go with reward cards that offer you high rewards points for spending at ‘fine-dine’ facilities. Pankaj Maalde, head, financial planning at apnapaisa.com maintains, “One also needs to check for the joining fees or maintenance charge if any and compare the rates. Most of the vendors wave off the maintenance charges but you will have to see that it should not get billed to you afterwards.” Spend wise: Debit cards directly pay from your bank account. So there is nothing to worry about, as you cannot spend beyond your ability to repay. But you have to be a bit careful with your credit cards. You have to repay your bills on the due date prescribed by credit card issuing bank. Hence it is better to spend within your means. Credit card is a facility and not a ticket to bankruptcy.
Repay right: Typically a credit card offers the card holder to pay his bills in 30 to 52 days. You have to pay by the stipulated due date and failing which, there is a penalty for non-payment. Maalde further says, “If you pay within the due date then you need not pay any interest. Otherwise one has to bear the high interest burden which is between 36 per cent and 42 per cent per annum.” Some individuals opt to pay minimum amount due, however it does not save you from payment of interest. As you miss your credit card repayments, your CIBIL credit score also goes down, dampening your credit profile. To ensure that you pay on time, you may choose to keep a standing instruction for fund transfer on due date from your bank account to your credit card issuing bank.
Maintain secrecy: While swiping your debit and credit card at a merchant outlet, do it in your presence. Do not share your ‘Online Transaction Authentication Code’ with others. Update your mobile number and email id in bank's records. This ensures that you get transaction alerts on time, and fraudulent transactions can be pointed out immediately.
Protection: Some banks offer life insurance to the card holders to the extent of outstanding amount, for a premium. Opt for such a plan. It helps to repay the bill outstanding, in case of an eventuality. Also there are card protection plans that can be availed. In case of loss of cards due to theft or otherwise, you can protect yourself from the loss arising out of unauthorised use of cards. Credit cards used to your advantage can be both money and time saver, and further offer convenience to transact seamlessly throughout the world.

S Mayura ET130129