SAY NO TO PLASTIC!
One of the strengths of Indian economy is the higher savings rate. However, over the last few years, we have been influenced by the Western culture of spending and have become a spenders’ society. As a future generation, you need to take the lead and start being smart with money. This will also help the Indian economy prosper.
One of the factors fuelling the rise in spending is on credit cards. Here are a few things that everyone needs to know about a credit card. This will help you make smart money decisions, especially where the use of a credit card is concerned.
Credit cards companies lure customers into signing up for a credit card by offering free of cost. As a result, people often believe that if there is no cost involved in signing up for it. Because WHY NOT? So even if you have a card that can take care of your needs, you will ask for one more. When you use your credit card to pay for something, you are actually paying for it more. This is because there are various charges that come with credit card usage.
Let’s have a look at few of the charges.
1. Annual Fee
In order to induce you to buy a credit card, many companies offer a free card and many even offer you no annual charges for the first year. However, annual maintenance fees are charged in later years.
This is a finance charge credit card users need to pay. An interest of 2% to 4% is levied on the outstanding amount if it is not repaid before the due date. If one fails to pay the amount before the due date then the interest charges may rise from 24% to 48% per year.
3. Late Payment Charges
Every time you make a late payment over and above the interest rate charged, credit card companies also levy a late payment which can either be a fixed sum or a percentage of minimum outstanding balance with a minimum and maximum threshold. This amount varies from one credit card company to another.
4. Duplicate Statement Charges
If you have missed your regular monthly statement and ask for a duplicate, there are fixed charges levied for the same.
5. Charges on Cash Withdrawals
Did you know you can withdraw money from credit cards too? But if you withdraw money from the bank against your credit limit, the company will charge you for the cash withdrawal. And remember, the interest on cash withdrawals is charged from day one.
6. Overdraft Limit
Credit card companies charge an overdrawn fee if the customer exceeds the set credit limit. This fee is normally a certain percentage of the overdrawn amount with a minimum and maximum threshold.
7. Foreign Currency Transactions
In case of transactions outside the country, the same is converted into INR at a rate suggested by the network infrastructure provider (Visa or Master). Credit Card issuers the transaction value subject to a minimum amount.
8. Petrol Transaction and railway ticket purchase fee
Petrol transaction charges are levied as a particular percentage of the transaction value subject to a minimum amount.
9. Service Tax
Expenses on a credit card are subject to a service tax of 12.24%, which is levied on the total value of the transaction inclusive of fees, interest and other charges.
Therefore. Before making a purchase with your credit card, make sure you understand the implications. Also, suggest the people who are close to you to use debit cards instead of credit cards. At the time of issuing the credit card make sure you have read all the terms and conditions thoroughly so you can be cautious about what charges the company might be levied on your various transactions.
– Jane Sha