Are you sending your bank wrong signals?

There is somebody who checks your credit card activity carefully, probably more diligently than you check your credit card statement – banks. The reason is the rising delinquencies in the sector. It is only natural, when you consider the tough times in the jobs market.

In a recent interview,Mohan Jayaraman, Managing Director, Experian Credit Information Company of India Pvt Ltd and Country Manager, Experian India, told _Firstpost_credit bureaus have special products which help banks monitor and manage risk effectively. There is a good possibility that you might just be doing a few things inadvertently on a regular basis, which send wrong signal to your bank.

Here are a few things that you may be doing that will prompt your bank to perceive you as a risky customer:

* Don’t withdraw cash via credit cards

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Now, we all know that credit cards can be used online as well as off line to buy products and services. In fact, a credit cards can also be used to withdraw cash at ATMs. This source of funds called “advance cash” facility is to be used only in case of emergency, and not regularly. Not only is it way too expensive, it also sends a wrong signal that you have a cash flow issue, and could be a high-risk borrower especially, if you use the advance cash facility for large amounts (the limit is usually 30percentof the credit limit).

* Kite Flying

Kite flying is a credit card trick where you give the banker a false impression knowingly or unknowing that you are credit worthy when in reality you may not be. And it gives an absolute wrong signal to bankers about your financial capacity to repay your credit card dues.Ideally, you should be paying the total amount due, on your card every month. But, if you can’t pay that amount, banks expect you to pay at least the minimum amount due on the card. Kite flying is when you use one or more credit card to withdraw cash at an ATM as advance and pay dues on another credit card. Of course, this only works when the rate of interest you pay for cash advance on the first card is lesser then the interest you pay towards pending dues on the second card. Some people also try card kiting on the same card, where they withdraw cash using your credit card at an ATM and make a minimum amount payment on the same card. But, this is not a wise thing to do.

* Laziness can cost you dearly

If you are a lazy bill payer, you are sending banks a signal that you don’t take your commitments seriously. Paying your credit card bill late once in a while is one thing may be okay but you definitely can’t do it frequently. Such a behaviour is a warning signal for banks. Also late payments can drill a hole in your pocket. Instead, keep reminders on your mobile phone, we would not recommend an auto-pay facility, unless of course you monitor your card statement on a regular basis.

There could be many reasons for you to send such wrong signals–may be you are in a tight spot, or you are ignorant or just because you are financially indisciplined. Whatever the reason, times are changing, and if you want to have a shot to any kind of credit in the future, the sooner you stop sending wrong signals to banks, the better for you.