Credit Card Important Points for rookie
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- The credit card company will give you a credit limit, this is the maximum limit that you can spend via your credit card
- Each credit card has a billing date, and on that billing date, a bill will be generated that will have all the credit & debit transactions between the last billing date and that billing date.
- Whatever bill is generated on the billing date, you need to pay that amount before the due date mentioned in the bill/statement.
- The due date is mostly 20 days from the billing date, and you can set your billing date, so whatever due date you need, you can set your billing date 15-20 days before it.
- To set the billing date you can use the mobile banking app or call customer care if the app doesn't have that feature to set the billing date.
- For each person using a credit line (eg: personal loan, credit card, buy now pay later), a credit company (eg: cibil) maintains a credit score for that person, this credit score shows how reliable are you in paying your debt. A high credit score means very reliable and can get new credit lines easily & in low interest. For cibil credit company, a score range is 600-900. 600 is the starting point, above 750 is considered good, >777 very good, >810 excellent.
- The credit score improves if you pay your bills timely.
- If you forget to pay your bills timely till the due date that then you will be charged a fine by the bank and interest (up to 50%) and your credit score will be reduced significantly. (which takes a lot of time to improve)
- Keep your credit card utilization less than 30% of the credit limit. For eg, if the card limit is 1L, your bill should not be more than 30K. If your bill is more than 30% then again your credit score will decrease, since the credit company will think that you are not able to manage your credit line properly. So even if you use let's say 50k from your credit card which has a limit of 1L then try to pay some amount to get it under 30% before the billing date, and it won't impact anything then.
- Bill/statement will have a "minimum due amount", if you pay that amount before the due date then a fine won't be charged but interest will still be charged. This "minimum due amount" is a trap for the customers, so try to avoid this. The minimum due amount will be 5-10% of the actual bill, for eg, if your bill is 10k then the minimum due amount will be 500, and the credit card company is saying if you pay 500 then we won't charge a fine and won't reduce your credit score, but you still need to pay interest on the rest 9500, which will be basically around 50% per year.
- If in some month, you pay more amount to the card than the actual bill then your next bill will be in the -ve, this means that you don't owe anything, credit card company owes so. So you need to use the card to get the extra amount back. Some banks (like Sbi) give the option to transfer an extra amount to the bank account
- this trick is used to buy something that is more than your credit limit. For eg: if your card limit is 10k and you need to make a 15k order then you can pay 5k to the card, and it will give you the flexibility to buy for a 15k amount.
Note: some banks won't allow to use of more than a credit limit in a single transaction. So you need to check if the bank supports that trick or not.
- this trick is used to buy something that is more than your credit limit. For eg: if your card limit is 10k and you need to make a 15k order then you can pay 5k to the card, and it will give you the flexibility to buy for a 15k amount.
- At any time, you can only use up to the maximum limit of the card. For eg: let's say, your card limit is 20k and your bill is 10k, then in the next month you can only use the rest 10k balance until you have paid back.
- If you want to use more than your credit limit in a multiple transaction, then you can prepay and reuse it.
- Any transaction after the billing date will be counted in the next billing.
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free ka maal dariya me daal
nice post
VU+ for the post
Other important points -
1. A credit card is not a financial instrument to be used when you do not have money. It is to be used only when you have enough money.
2. Refunds do not count as payments. So, if your dues are Rs 10k, and there was a Rs 2k refund, say from a train booking cancellation, then it does not mean you can pay Rs 8k and consider your dues settled. You need to pay the full Rs 10k otherwise you'll be charged interest. Yes, the Rs 2k will show as negative balance and that's totally alright. Spend as usual on your credit card and it will be adjusted against it next month.
3. When you don't clear the entire dues, interest charged is on the entire amount rather the remaining dues. So, if the dues were 2L and you paid 1.99L, the interest charged will be on 2L and not 1k.
4. Round _up_ and pay your dues. Do not round down. So, if the dues are Rs 1000.5 then pay Rs 1001. Do not pay Rs 1000. ICICI is particularly infamous for reporting you to credit bureaus without even warning / informing you that you have a few paise as outstanding dues.
5. No cost EMI has a cost. Yes, your interest is offset against the instant discount but there will still be the processing fees, GST on that as well as GST on interest. If you can't afford to pay for that phone, TV, AC, bike in full then don't buy it now. Wait till you can.
Otherwise yes, agreed.
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Create something similar for mutual funds and stocks too pliz