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Credit card secrets- 5 things to know before using a credit card.

            Do you want to know the difference between credit card and debit card? Do you want credit cards? Do you want to do the best use of credit card? The answers of the questions and others important things are covered here. Let's start:

Credit card secrets- 5 things to know before using a credit card.


What is the main difference between credit card and debit card?


           Debit cards are linked directly to your bank account. If you have 1000 rupees in your bank account then you can spend maximum 1000 rupees with the debit cards (like shopping,bill pay,recharge etc) and the money will deduct from your bank account on the same time. So you can maximum debit or use the money that you have in your bank account with this card. For this the card is called debit card. There is no direct relation between Credit card and your money that is stored in your bank account. A limit is fixed in credit card. And the limit is fixed on the basis of either your salary or the annual profit of your business. The credit card issuing company give you a limit. Suppose the credit card issuing company says that you can spend 10,000 rupees monthly with credit card. And this limit (here 10,000 rs) is decided by the credit card issuing company on thr basis of your annual income. If the limit of credit card is decided 10,000 rupess monthly then you can use the money in spite of having no money in your bank account. The card is called credit card. Because the bank or company give you credit or loan to use the money that you do not have right now. 


What are the advantages of credit card? When will the money be returned to the credit card issuing company?


           The big advantage of credit card is that you can get interest free money for about 50 days( the time is decided by the credit card issuing company). If you get the card on 1st may then you can spend your credit card limit money within one month or till 31st may. Suppose your credit card limit is 10,000 rupees and you spend the whole limit on 1st may. The bill of your credit card will be generated on 31st may and the bill will be generated of 10,000 rupees. And the bill will be paid after 15 to 20 days of generating the bill. And usually you are given 20 days to pay the money to bank. So you spend 10,000 rupees on 1st may and you will pay the bank on 20th june or after 20 days of generating the bill. Because the bill will be generated on the last date of month. So you use the interest free money for 50 days. If you have 10,000 rupees on your bank account and if you use the debit card then your money is deducted from your bank account on that time. But here you put your 10,000 rupees in your bank account and you get interest on your money from bank. And using credit card you spend the 10,000 rupees that you will pay on 20th day of next month or after about 50 days(in this case). On 50th day you will pay the credit card bill using your debit card from your bank account. So the interest free loan for 50 days is the main and first advantage of credit card.


         The second advantage of credit card is that you can keep safe your bank account from fraud transactions. In many cases when you do online shopping or use your debit card on any website to pay is not safe. If you do payment on unsafe website and if the card details is stolen then the fraudsters can withdraw your whole money from bank using card details. If you have 50,000 rupees on your bank account then they can withdraw all your money from bank account. So it is the problem. But if you use the credit card you can keep safe from the problem. Because your credit card is not linked directly with your bank account and your credit card limit is 10,000 rupees. So you can use or register it anywhere. You have the surety that as your credit card limit is 10,000 rupees so the fraud of more than 10,000 rupees can not be happened with you. So there is no risk on your bank' savings when you use credit card to pay online because credit card is not linked with your bank account. 


          The third advantage is that if you want to take home loan after 2 year but now your cibil score is not good. Cibil score shows the history report such as when you took loan and when you repaid the loan to bank. The cibil score of many youngsters who did not take loan before is average because they either do not take loan or don't repay. If you do not take loan before then the bank have no history of you so that the bank can know the ablility of returning the loan. Now you want home loan but your cibil score is not good because you do not take loan before it. In this case you can use credit card to improve your cibil score to get more loan. You can spend small amount using the card and after the time period you repay the amount to the bank. Thus way your cibil score becomes good. So after two year when you apply for home loan then the bank see that you use the credit card for last two year and you repay the loan on right time. In this case the bank likes you,your cibil score improves and the chance of giving home loan or educational loan etc by the bank to you increases. 


        The forth advantage is that most of any sevice provider (like software service) that needs recurring payments only allows credit cards to pay so that their payments can be given every month.


          The fifth advantage is that it is very useful In finamcial emergency. Such you need money for medical needs like operation. But if you have not sufficient money on your account for this operation and your salary comes on next month then in this case you can take loan(as your credit card limit) for the operation(or other financial needs) using credit card. You can be tension free because you know your salary comes in next month and you will pay the credit card bill on next month. So the credit card is very useful in such emergency cases. 


          These are good features of credit cards. But all the things of credit cards are not good. There are many things that you should avoid about credit cards. You are told before that bank give you about 50 days interest free loan if you use credit card. Why does the bank give their money freely to public and here what are the benefits of banks? The bank gives you credit card thinking that you will use the credit card bindlessly. If your salary is 30,000 rupees monthly then bank wants that you will spend 50,000 rupees monthly using credit cards so that you can not repay the loan to bank. And from here the benefits of bank start. When you can not repay the credit card loan within 50 days then on 51th day bank calculates your money with the interest of 51 days.  And the interest rate is very high. The interest rate is about 36%-40% that is huge. If you take personal loan then you have to pay 15%-18% interest. For this bank gives the credit card so that you can not repay the loan to bank and the bank earns 36-40% intetest on your loan. It is the greed of bank behind issuing credit cards. If you are not able to pay on 50th day then on 51th day bank do not calculate your loan with one day interest. Bank calculates the 36-40% interest on your loan for 51 days. So it is necessary to keep in your mind that using credit card you should spend the money that you can repay on 50th day. Otherwise the condition may be very bad. If you do not repay the loan on 50th day the you have to obviously pay high interest and on the other hand your credit card score will be damaged. Bank will reduce your cibil score describing that you do not pay the loan within the time limit.


        When you use credit card then there are two option in your credit card issuing company's(bank) app. 

1. Auto debit on 50th day from your bank account to repay the loan.

2. Minimum amount pay.

Full auto debit means if you use 10,000 rupees using credit card then on 50th day the money will be automatically auto debited from your bank account to pay the bill. So it is best remedy to get free the tension of credit cards. And it is impossible when you spend the money that you have or will come on your savings account next month using credit card. Some bank offers the second option,minimum amount pay. If you spend 50,000 rupees then the bank tell you to pay minimum payment of 5,000 rupees and the rest of the loan will be paid gradually. Because the bank wants to impose the burden of the high interest on the rest of loan to you. So don't pay minimum payment. So always do full auto debit payment. If you think to stop the auto debit payment service and want to pay the loan on 50th day yourself then there is chance of forgetting the loan. And then bank starts their game. So full auto debit payment is safe for paying credit card bills. These are the advantages and disadvantages of credit card. But if you do not know this before and give your step in the trap then how can you get freedom from credit card? If you do minimum payment to pay credit card bill monthly but it is seemed to you that you never pay the loan with interest of your credit card bill because of high interest of about 36%. So here it is a best option that you should take personal loan and pay first the credit card bill. Because the interest rate in personal loan is maximum 18%. the rate is half of your credit card's interest. You can save about 18% interest. And you interest burden will decrease. If you do not get loan then request to help your family members or friends.


          If you have any query related to credit cards secrets please comment below so that the topic can be covered.


Best wishes to invest.



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3 Comments

  1. Thanks for sharing the best information and suggestions, it is very nice and very useful to us. I appreciate the work that you have shared in this post. Keep sharing these types of articles here. Best Way to Pay off Credit Cards

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  2. I think this is a really educational article which you have shared here about credit card. This is a great way to enhance knowledge and also helpful for those who want to know about how to eliminate credit card debt.

    ReplyDelete

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