Using Credit Card Sensibly

Credit Cards have played a definite role in increasing the monthly spend of people. It sounds so good with presumable 0% finance; incentive points on shopping; and no money changing hands that you end up with feeling of getting every thing virtually for free.

If used sensibly, credit cards are a very useful tool for modern day life, but these Credit Cards are double-edged sword too. No doubt that they do help you improve your living standards, allow you the comfort of carrying minimum cash; but these cards need to be used responsibly, else you can become an out-of-control impulsive buyer.

A recent study by VISA international revealed that card holders tend to spend about 50% more as compared to those shopping in Cash. While this could be a good news for economy, but is a cause of concern if it leads to massive defaults on the financial front.

One of the traps used by credit card companies is to offer interest free credit on purchase of white goods as jewelry, music system or other select products. In business, there is no free lunch. Some body has to pay interest costs. Though often such discount offers are result of bulk deals entered with the manufacturer by the card company, in some cases the cost of interest is inbuilt into the basic price of the product. Before buying, do check up the price of the product if bought in cash.

The credit on credit card should be reserved for use in emergency situations only. As a card holder, you need to be educated about the responsibility that comes with the credit card and be aware of dangers of abusing limits available on credit card. Credit Card companies charge heavy amount of interest and penalties for delayed payments.

In any country, rate of interest on lending is directly proportional of security of debt. Unsecured loans carry highest rate of interest. Since the lending on credit card is virtually unsecured, borrowing on it is very expensive. Getting out of the interest trap can be tough. God forbid, if you ever get trapped in expensive debt of the credit card, immediately explore alternate means of raising finance to repay the debt on credit card.

Even credit card companies are quite accommodating in waiving off small charges for late payments.

If unfortunately, you end up with some default, immediately approach the credit card company and ask for waiver of such charges and promptly settle the bill.