X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
How To Use Your Credit Card Thoughtfully Post-Demonetisation - Outside View by PersonalFN
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

How To Use Your Credit Card Thoughtfully Post-Demonetisation
Jun 23, 2017

In the Financial Year (FY) 2016-17, Indian banks recorded a flat growth in credit of 4.5%. However, they managed to woo their retail customers to take on additional credit cards. In the last fiscal, credit card issuance grew by massive 57%, while debit cards recorded a growth of 36.95%, as reported by Daily News & Analysis dated June 02, 2017. The banking system issued 53.37 lakh credit cards in FY 2016-17.

Attractive reward-point schemes and customer-centric marketing strategies are believed to have helped banks accelerate growth in the credit card segments. As revealed by bankers, the card spends have also gone up post demonetisation since individuals preferred electronic payment options.

Nonetheless, banks have managed to issue 12.31 crore debit cards outnumbering credit cards by a fair margin. This suggests that a huge jump in the credit card segment springs from a relatively smaller base, and the usage of credit card is still restricted to spendthrifts. However, the increased spending through credit cards calls for some attention.

Therefore, if you are planning to apply for a credit card or are using one already, please read further...

While using credit cards moderately is the way to go, following a disciplined approach can save you from falling into a "credit-card debt trap".

Tips To Use Your Credit Card Prudently...

Know the limit on the card:

All credit cards come with a ceiling limit. Choose a card with a low limit and moderately utilise the credit limit, say 30%-40% of your overall limit.

Pay up before the end of the credit settlement cycle:

One of the benefits credit card companies provide is a free credit period, which means, if you make payments before the payment cycle ends, interest won't be charged. However, if you fail to honour payments within the due time, you are likely to pay interest which is usually as high as 36% p.a., i.e. 3% on the outstanding amount due each month.

Avoid availing the grace period:

Some creditors may offer a grace period to settle your dues. Ideally, you shouldn't wait this long to settle your credit card account, and it is best to pay within the free credit period. This may dampen your credit score, and in turn, weaken your eligibility for loan proposals in the future.

Don't get swayed by reward points and other benefits:

Credit card providers will always want you to maximise the use of credit facility because that's a way they earn more revenue. And in case you don't make a payment in time, the interest you are charged turns out to be a bonanza. So, one marketing strategy is to launch attractive reward-point systems that encourage you to spend more on a credit card. Control impulsive purchases and keep the usage of plastic money under strict control.

Secure your card details:

While using your credit card to make online purchases, for security reasons do not store your card details online as they can be misused if the merchant site fails to protect the secrecy of your data. Always use two-step authentication and don't allow any 'fast-forward' transaction.

Unless you see "https://" on the payment page, don't enter any payment/personal/card details. By viewing the site information, you can also check if the communication between you and the website is private and protected. Be careful when using your card at a merchant outlet as well.

Avoid withdrawing using the credit card:

Please note this unwritten rule in your diary. If you use your credit card, even in an emergency, to withdraw money from an ATM, credit card companies charge an exorbitant fee. If you maintain a contingency reserve, there will be no need to use your credit card to borrow cash.

Key points to remember while opting for a credit card
  • As far as possible use a debit card instead of a credit card-the first step to rationalise your expenditure pattern.
  • Revisit your lifestyle options if settling your credit card account is taking a big toll on your monthly income. This is a sign that you are overspending.
  • Never use another credit card to settle your old credit card dues-this is the beginning of a big debt trap that may haunt you a long time.
  • If you are unable to keep your expenses under control, perhaps it is time to speak about prudent financial planning with a reliable financial planner in your vicinity.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "How To Use Your Credit Card Thoughtfully Post-Demonetisation". Click here!

  

More Views on News

What They Forgot to Tell You About Sensex at One Lakh (Smart Contrarian)

Nov 29, 2017

Stocks that could beat Sensex returns in the long term.

How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

Jun 10, 2017

Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

The Technological Marvel That is Ethereum (Outside View)

Feb 23, 2018

Have you been wondering what the hoopla about Ethereum is? It commands the second highest value among virtual currencies and its popularity is rivalled only by bitcoin. Let's break it down.

A New Quest for the Stock Market's MOST Profitable Ideas... (Smart Contrarian)

Feb 23, 2018

If you want to receive the best ideas in the Indian stick markets...you need to heed this important announcement.

Ramesh Damani is Bullish on Niche IT Stocks and I've Found One for You (The 5 Minute Wrapup)

Feb 23, 2018

This IT Company can be a huge wealth Creator for Smart Money Secret's Subscribers.

More Views on News

Most Popular

The Foundation for Sensex 100,000 is Laid(The 5 Minute Wrapup)

Feb 17, 2018

Top three reasons for Tanushree's presentation at Equitymaster Conference to be centered around a possible 30% correction.

India's Rs 1,66,276 Crore Problem(Vivek Kaul's Diary)

Feb 15, 2018

That's the loss, the government owned public sector enterprises are expected to make this year.

The Big Gamble(The Honest Truth)

Feb 15, 2018

Once you accept the fact that elections are round the corner and that this budget is geared to reach a 40% target, everything makes sense.

How I Beat the Index by 2x... And Why I Believe This Could Happen Again(Smart Contrarian)

Feb 12, 2018

Will Microcap Millionaires be able to replicate its past performance of beating the index by 2x?

NPAs Set to Rise Further with New RBI Rules(Chart Of The Day)

Feb 15, 2018

The RBI overhauls bad loan framework. Banks may come under additional pressure due to rising NPAs and increased provisioning.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Feb 23, 2018 (Close)

MARKET STATS