Life is probably good right now. You’re young, have a good job and have the bank beating a path to your door offering you credit cards, investment opportunities and loan blandishments. And to be sure, using a credit card can feel great – all you do is sign when you make a purchase; no need for carrying cash! Plus you don’t have to pay now; you can buy something even if you don’t have the cash in your account today. But before you use that piece of plastic to buy yourself retail heaven, here’s what you should know and do:
Look for the right credit card
Many credit cards will arrive with some attractive gift and discount vouchers. They could earn you credit points depending upon the type of card you opt for. Your credit limit will also be determined by the type of card you get. So look for a card that has good benefits.
Understand how a credit card works
You generally have 30 days grace after you make a purchase and before you need to pay your credit card bills. Even though your credit card statement says “minimum amount due is X” that isn’t strictly true. If you pay only that minimum amount you will have to pay interest on the remaining amount. In fact the credit card company hopes that you will pay not now but later so they get a chance to earn some interest.
Understand the terms
There are credit cards that carry an annual fee and those that do not. Credit cards could also have an application fee, account service charge, late payment fees and there could also be a significant interest rate charged when you use your credit card to withdraw cash. So be very clear what the terms of the credit card are.
Use your card well
Many retailers have tie ups with credit card companies to encourage you to use your card instead of cash. So you could get extra discounts and better deals when you use your card to pay. So long as you don’t run up unpayable bills, use your card as much as possible.
Use your bonus points
The more you use your card, the more bonus points you collect. This can translate into gift vouchers at your favourite retailers or other benefits such as travel and restaurant deals and so on. Keep track of your points and redeem them to take full advantage of them.
EMI? Read the terms
When you make a big purchase such as a TV or home appliance, you will likely get a call or message from the credit card company telling you that you can repay the amount in easy monthly installments. The installments will attract interest so try and work out a deal with the retailer instead of the credit card company; this could save you some money.
