Getting your first credit card can be exhilarating as it indicates you’ve finally ‘arrived’. With no requirement to pay cash immediately, the tendency to swipe your card to buy almost anything can be incredibly tempting. But if you’re not careful, it can also wipe the smile off your face.
The Economic Times’ personal finance supplement, ET Wealth, has some guidelines for credit card newbies:
•Stick to a budget: The convenience of using a credit card can easily make you spend more than you can afford. So, when you start out, keep a monthly limit on expenses. Don’t go overboard with your spending.
The convenience of using a credit card can easily make you spend more than you can afford. AFP
•Pay the entire amount due on time: At regular intervals, you will receive a bill containing details about how much you have spent by card and the date by which you have to pay up in cash. It’s important to pay on time; otherwise, you will be charged a late fee.
Also, don’t fall for the trap of paying only the ‘minimum amount’ and rolling over the balance to the next month as this will eventually lead to a debt trap. Banks usually charge a high interest rate for rolling over balances.
•Secure your card: Do not disclose details about your card to other people as the information can be misused and you will be held responsible for that. For instance, if you give your card to a salesperson, make sure the card information is not stored anywhere. Also when making an online payment, ensure that the payment is being made on a trusted website.
•Avoid cash advances: Do not use your credit card to withdraw cash from a bank or ATM because the money you withdraw is considered a cash advance, and you’ll have to pay very high interest rate. So, do that only in the case of an emergency.
