Credit Cards: A Boon or Curse??

By First Posted: Mar 19, 2007 Mon 11:30 AM Updated: Dec 7, 2007 Fri 12:25 AM

Credit cards are a necessity these days. They are considered a boon for the ready convenience they confer on the user- you dont have to worry about carrying enough cash while going shopping or to a restaurant. Just flash your card, sign and walk out.

But many criticize credit cards for the easy money syndrome they generate. Many people fall into a debt trap- thanks to the extensive use of their cards. But if youre careful with your expenses they can be a handy thing to have around. Hence, you need to consider the term responsible usage and understand the actual significance of living on credit.

A credit card does not mean free credit. In effect, using it is merely postponing payment. While it looks real good to have to pay only one or thousand a month on your card, youre paying interest on the amount that you revolve from one billing cycle to the next.

But heres one precaution we should add. Always settle a credit card bill full for two good reasons. First and foremost, if you are not able to pay now, you should not have spent it in the first place. Second, the credit charge now tends to be extremely high ranging from 2 per cent to 3 percent per month.

Almost every bank has launched a card. So the biggest hurdle you face is in trying to choose from amongst them.

So how does one choose among the various cards on offer? The factors for choosing a card revolves around certain differentiating features offered by each like acceptability, eligibility, fees, other changes, credit period, cash advance etc.

Cards which carry the Master or Visa affiliation are more wisely accepted across the country compared to Diners and American Express cards. Similarly, global credit cards are valid even outside India. If you travel regularly within or outside India, these cards would probably suit you the best, for their acceptability worldwide.

If your credit card is more of a functional accessory while you shop or entertain in your own town, you will want a higher credit limit. Here, foreign and private bankers will give you a higher limit. But if you are a value for money person who likes the convenience offered by a card, but will alternate between paying by cash and card, you should consider credit cards offered by the public sector banks. Their entry fees are typically lower. They give longer credit periods and credit charges. But you may not get a very high credit limit.

Many of us nowadays carry more than one card; you should use them to segregate your expenses. For example, if your employer reimburses you for certain travel and entertainment expenses, it would be a good idea to charge all official expenses to one card and all personal expenses to the other card. This will help you account of your official expenses easily.

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