 Play
your cards well
Dancewithshadows.com tells you how to choose a credit card, how to use
it smartly and how to avoid a debt trap
BY SPK
On August 24, 2004, Standard Chartered Bank launched its global credit
card 'Manhattan' in India under which the rate of interest on card usage willvary from person to person. While the minimum rate of interest is 1.49% under the plan, it can go up to a maximum of 3.19% depending upon the usage and payment pattern of customers. Soon, other banks quietly took up the challenge and lowered interest rates for "good" customers. And, several banks claimed they already had varied interest rate plans based on the customer 'usage and repayment pattern.' With this, the rate war among card majors intensified.
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So do not be surprised if you are being courted by banks of all hues
with credit cards, freebies attached. Dancewithshadows.com provides you an insight into how you can arrive at the best deal, how you can use credit cards smartly and how to avoid falling into debt traps.
How to choose a credit card
The first step is to go through the fine print carefully. Make a
comparison of the rates of different credit cards to find out which
will work out cheapest for you and select the card best suited to
your lifestyle. You can go in for an add-on card if a family member is
also in need of a card. Most importantly, do not accept the credit
card going by 'free card' claims because, whether you use it or not,
you will have to pay the annual fee at the end of the year.
How to use the credit card smartly
Do not splurge just because you own a credit card. Draw a budget, know
your credit limit and do not go beyond that. Don't get tempted by the
offers and reward points you get when you use your card. Use your card
only when it is absolutely necessary. Use your reward points once they
accumulate to avoid spending money where you already have credit due
to you.
How to avoid a credit card debt trap
Make the payments before the due date every month, once you receive
your credit card statement. This way, you will not end up paying
anything e/xtra towards late payment and the interest thereafter.
Do not go in for multiple cards because you may not be able to keep track of all the
payments and your expenses. If you are being offered a card with higher credit limit, learn to say no if it gives you no greater benefit.
If you have huge outstanding amounts, try to convert them into personal loans available at lower interest rates. This will also
give you more time to pay your dues. Also, almost all banks offer
balance transfer facilities today, where if you transfer your
outstandings from one bank to another, you will be charged a
substantially lower interest rate on the amount.
BY SPK
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