5 Common Credit Card Don'ts


Credit Cards have become part of our daily life as it not only convenient but also helps as a temporary credit facility. But it is important to maintain certain good habits with your credit card before you find yourself in a debt trap. Five common things that we generally ignore, have been discussed in the article.

Credit Cards are a common thing these days. Most of us have more than one Credit Card. Its not only convenient to handle but also help managing expenses by way of EMIs. At times it also adds to your personality. However, managing Credit Cards (in case you have more than one) in itself is a cumbersome task. If not managed properly, in no time it can become a big headache. As it also affects your Credit Score with Credit Information Companies (like CIBIL, Equifax etc.), a poorly managed Credit Card may result in poor Credit score, making it difficult for you to get a House or Car loan from banks.

Let us have look at some common don't with your Credit Card:

1.Never pay only minimum amount:

By making sure that you pay the minimum amount of Credit Card bill ensures that you are not charged with a penalty. But that's only one side of the coin. Credit Card companies charge an interest on the amount paid beyond the bill payment date. Let's see an example. Below is the snapshot of a Credit Card bill:

  • Bill Date: 30th December 2015
  • Bill Amount: Rs. 10,000/-
  • Bill Payment Date: 20th January 2016
  • Minimum Amount Payable: Rs. 1,000/-


  • Now suppose instead of paying full amount, you chose to pay only the minimum amount of Rs. 1000/-, then Rs. 9000/- will be carried forward for the next bill. Credit Card companies charge interest at the rate of 3.00% p.m. to 3.50% p.m. on this carried forward amount.

    This interest rate is the biggest catch. Rate of interest is generally expressed in terms of per annum (year). However, Credit Card companies express the same in terms of per month. An interest rate at 3.00% p.m. entails to 36.00% p.a. And this is really very high interest rate. Even Banks don't charge such a high rate.

    So instead of paying the minimum amount, try to pay the maximum amount. You can again use the remaining limit without any interest burden.

    2.Never go on advertisements:

    Advertisements like 5% cash back and reward points are only traps. Even a 5% cash back will have a cap of say Rs. 1000/- per card. But to get that cash back, you will spend Rs. 20,000/- and in case you didn't manage to pay the full amount by last payment date, the interest that you will be paying on the carried forward amount will be much more. Remember, interest is the only income source for Credit Card companies, so they put traps in form of juicy advertisements to hole out more amount from you.

    3.Don't have too many Credit Cards:

    Having too many credit cards means that you will find tough even to pay the minimum amount due. And the cumulative outstanding balances on all cards will really bleed you out. This will also affect you Credit Card score and they can mark you as a Risky Customer.

    4.Don't pay without reviewing:

    Always go through the Credit Card Statement before paying. At times they charge interest wrongly. If you feel so, get to customer care. In most of the cases you will be able get a refund. Reviewing the statement also helps to detect Credit Card fraud, which are common these days.

    5.Never ignore the bottom-line:

    End of the credit card statements are very helpful to understand your Credit Card. In relatively small words, the statements describe the way they charge penalties and interest rates. Go through it and check whether the interest charged on your bill is as per the terms. Interest on Credit Cards is also eligible for Service Tax. It is 14.00% (plus 0.50% of Swachh Bharat Cess). Please check whether the Service Tax is levied on entire outstanding amount or only on the interest charged. It should be the other way round.

    Hope the tips help.


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