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When you should not use your credit card!


Credit-card-freeze_Paalia_Paul-Stocker

Credit card is one of the most important financial inventions in modern times. However, this much-sought after boon can be a real bane to your finances if not used with care. Here are a few instances when you should restrict the use of credit cards in order to keep your finances in order.

Using credit cards for everyday expenses: This is one of the most common instances when people use credit cards – to buy their day to day items. While using credit cards to purchase groceries and household items is not always bad, using it regularly may result in your overspending and crossing your monthly budget. Always draw up your budget for such purchases and use your credit cards within this limit. Beyond this, it is better to use cash or debit cards.

Using credit cards for cash advances: Drawing money from an ATM through your credit card to meet emergencies is an easy way to combat cash shortage; but have you realised the impact it will cause on your finances? Not only is the interest rate charged on the advanced amount exorbitant at 2.5%-3.5% per month, but this also gets charged from day one itself. Besides you will also have to pay a flat transaction charge as well.

Best credit cards for salaried professionals

Credit limits are based on the annual income and credit history of the individual. The higher the annual income, the higher will be the credit limit. Every bank has different types of cards, based on ... more 
Credit limits are based on the annual income and credit history of the individual. The higher the annual income, the higher will be the credit limit. Every bank has different types of cards, based on cash rewards, savings and discount in various expenses, gift vouchers or exclusive benefits less 
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Bankbazaar.com
Mon 17 Jun, 2013 1:30 PM IST

During the months you have restricted cash inflows: Credit cards come with a free credit period of 20-50 days. If you do not pay your bills within the due date, you will be charged a hefty late payment fee, high interest of 2.5%-3.5% per month and also taxes on these charges. Hence if you think you will not be able to generate cash flows to make payment on your credit card within the due date, it is best to refrain from using it.

Using credit cards when you travel abroad: When you use your credit card for transactions in a foreign country, you are usually required to pay a charge on foreign currency transactions. Also, do not forget the exchange rate fluctuations, which determine the amount you will have to pay. If you instead opt for a prepaid currency card, it will help you better.

Using credit cards only to accumulate reward points: In order to attract customers, credit card companies offer various offers and high reward points on purchases made. While accumulating reward points is good, spending on your card only for this reason is not very healthy. You will soon realise that even though you have high reward points on your card, you will have to pay hefty bills, sometimes even on unnecessary purchases made without forethought.

How your credit card limits are set

 

Have you ever wondered why spending limits on your credit cards vary so much? The spending limit or the credit limit is a function of the borrower's income and usage. The crucial factor that

... more 

Have you ever wondered why spending limits on your credit cards vary so much? The spending limit or the credit limit is a function of the borrower's income and usage. The crucial factor that determines it, though, is sourcing of information about you by credit card companies.

The companies do the sourcing in two ways--through income documents that you submit, such as the salary slip and the income tax return, and surrogate methods such as your association with a brand, a merchant outlet or a premium club.

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Ani
Sat 22 Mar, 2014 5:01 PM IST

When you shop at unsecured websites: Online shopping has off late become very popular. While it is a convenient way of shopping, you must refrain from using your credit card and sharing confidential information on websites which are not secure. Always check for security levels before making credit card payments in such cases.

When you cross your credit limit: It is best to stop using your credit card when you are close to your credit limit. This is not only good for your credit score, but also helps you keep a check on your expenses levels.

How to keep your debit card transactions safe

 

While many consumers choose to use a debit card in order to avoid accumulating credit card debt, they may not be aware that they could lose more of their hard-earned cash through debit card fraud than... more 
While many consumers choose to use a debit card in order to avoid accumulating credit card debt, they may not be aware that they could lose more of their hard-earned cash through debit card fraud than if they had used a credit card for a purchase. less 
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Investopedia
Sun 1 Apr, 2012 8:05 PM IST

When you see a discount sale: Do not use your credit card indiscriminately as soon as you see a discount sale. This is a sure shot way of you exceeding your budget and spending more than you can afford. Be prudent when you use your credit card in such situations and purchase only what you really want. When you use your card for unaffordable purchases, you will soon end up in a debt spiral, which affects your financial position gravely.

When you have multiple cards: When you have many credit cards, keep a note of the billing cycle and due dates of each card. Do not use the card which is closer to the billing date; instead use a card which has a farther off billing date. This will give you a higher credit period and makes more sense to your finances.

Remember, a credit card is not always the best option to spend. Nevertheless, it can work wonders to ease your financial situation, if used smartly, with care and discipline.

BankBazaar.com is an online marketplace for your personal loan, home loan and car loan needs.

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