Important points to keep in mind when using a credit card

Credit cards generally offer an interest-free period of up to 51 days. However, this facility does not apply to ATM cash withdrawals by credit card. You will be charged interest from the day you make the withdrawal.

Credit cards can be useful for getting instant cash, especially in an emergency, but if not used carefully they can easily become a curse in disguise.

To begin with, there may be several reasons why you want to close or cancel a credit card. For example, you could either spend unnecessarily and head into a debt trap, or not use some of your credit cards at all.

Therefore, when using credit cards, you need to avoid some common mistakes that could prove costly and even end up falling into a debt trap. A debt trap can be financially damaging and you could accrue interest unless unpaid dues are paid in full.

Here are some important things to keep in mind when using your credit cards:

1. No interest-free period on cash withdrawals

Credit cards typically offer an interest-free period of up to 51 days at point-of-sale (POS) merchant establishments or online. However, this facility does not apply to ATM cash withdrawals by credit card. You will be charged interest from the day you make the withdrawal.

2. Roll the credit

Rolling over credit means not paying all credit card dues when due or due. This leads to high interest rates or finance charges that hover around 3.5% per month and between 36% and 45% on an annual basis.

In case of partial payment of credit card fees, be sure to pay the rest of the amount as soon as possible without waiting for the next due date, in order to reduce your interest charges.

3. Credit card expiry date

A credit card penalty is imposed, ranging from Rs 750 to Rs 1,000 depending on the amount if the last payment date is missed. The penalty varies depending on the card issuer and the outstanding amount, which is usually at least 5% of the invoice amount. Therefore, experts say that a direct debit mandate from one’s bank – which ensures that credit card payments are made well on time – is an ideal option.

4. No interest-free period limit

All credit cards generally offer a free credit period of 45 to 51 days before the due date. That said, if the full amount of the previous cycle’s invoice has not been paid, there is no interest-free period. Therefore, you will not get any interest free days on new purchases, if you do not pay the full bill amount on time and you will also end up with high interest charges.

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Sara R. Cicero