How to manage your credit cards

New Delhi: Credit cards have been in India for a fairly long time now. However, it is only in the recent years that their usage has shown exponential growth.

The reasons are obvious – entry of aggressive private sector banks, thrust on retail products, booming economy, exploding choice of consumer products, young demographic profile, mushrooming multiplexes, shopping malls and so on.

There are a number of positives to using a credit card. But, of course, it comes with some serious negatives too, which if not properly managed can turn your credit card into a tool of your financial doom. Don’t let your credit card rule your karma.

The positives

No need to carry cash

Carrying around large amounts of cash for shopping is highly unsafe. Chances of getting robbed or pick-pocketed are high. In worst cases one can even be physically attacked. We often read of such incidents. Even taking out cash from ATMs has become risky.

Further, there may be many situations where cash may not be acceptable/possible e.g. in some hotels or airlines, online purchases etc.

The credit cards offer a safe and convenient option.

Purchasing power

Credit cards help to buy 'here and now' - buy what you like immediately and pay for it later.

It works still better for big-ticket purchases, when you do not have sufficient money in your account. You can still buy what you want and pay later in convenient installments. Credit card puts a lot of purchasing power in your hands.

However, as we discuss later, the credit on your card is quite expensive. Hence, it is extremely important not to carry any outstanding balances on your card. But if una able, do ensure to clear all dues within a few months time.

Free credit

Most cards offer an interest-free credit period. Depending on the date of purchase this can vary between 20-50 days.

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Say your bank generates the bill for purchases between Oct 12-Nov 11 and payable on Nov 30. Thus if you bought something on Nov 11 you get 20 days free credit, and if your purchase was on Oct 12, you get to enjoy about 50 days.

Therefore, if planned properly, you can enjoy maximum credit; every month.

Quick help in emergencies

Credit cards are extremely handy in emergencies. It could be a medical emergency, a car breakdown, an outstation trip on a short notice etc.

You don’t have to run around looking for money from your friends/relatives. Nowadays we have ATMs also. But till a few years back, if some need arose after the banking hours, credit card came to one’s rescue.

Free Offers

Credit cards offer many discounts, promotional offers, reward points etc. The idea is to maximize your spending. The more you spend, it is more likely that you will not be able to clear the full amount on the due date. And that’s when you interest meter starts and the bank will earn huge income.

But, if the purchases are planned and paid for on time, one can take good advantage of such offers or reward points.

Generates a parallel record

Credit card bills become a consolidated statement of your purchases and a quick and easy guide for you to assess your spending pattern and aid in your future budgeting.

Sometimes the product you bought may be defective and you may have misplaced the original receipt. One can use the credit card bill as a proof of purchase and get necessary replacement/compensation.