You had been saving up for this wonderful trip to Europe and you finally made it! You spoilt yourself silly with more than an eyeful of Europe, some fine dining and went a bit overboard with your shopping as well!

You could afford some of the unplanned expenses thanks to your international credit card! You made sure you did the smart things and noted down the exchange rate too on the day you were making the transactions! You did some calculation of your own and determined with all the conversions that your credit card bill was likely to tally to around Rs. X.

After a jolly good time you arrive at home and begin the daily grind! Soon your credit card bill also arrives! What follows is shock! The bill amount is nowhere the nice round X number you had in mind! It overshot it by nearly 5-6%. In this article we will find out how exactly the amount on your credit card is calculated, so as in future you take this into account to avoid unpleasant surprises!

Why your calculated value and amount on the credit card statement differ?

The two entities involved in the transaction apply additional fees for a foreign credit card transaction resulting in an additional cost of 5 to 6% for the end user. The first entity being the issuing bank like SBI or ICICI and the second, network service providers like VISA and MasterCard.

Why additional fee is applied?

The primary reason additional fee applied is because of intricacies and additional cost involved with currency conversion. Yet another reason is addition of a small margin of profit by the issuing bank and Visa/MasterCard.

What is the type and amount of charges involved?

There are basically three types of charges involved:

1.  Foreign Currency Conversion fee – Since you own an Indian credit card, your balance is automatically in Indian Rupees. When you do a transaction overseas, say 50 Euro you will be charged a foreign currency conversion fee as well. Visa and MasterCard automatically charge a 1-2% fee on foreign currency exchange and anything in excess of it is generally a small margin of profit for the bank.

2.  Foreign Transaction Charge – Irrespective of the currency, transaction amount, or cash withdrawal, providers (SBI, ICICI, HDFC, BOB, PNB, City Bank etc.) charge a Foreign Transaction charge, which makes up for around 2.5 -3.5% figure off the total transaction amount.

3.  Cash Advance Fee- It’s common knowledge that cash advances are expensive even within the country. If you are using your credit card overseas, withdrawing cash will definitely increase the fees. You can be imposed a 1%-4% additional fee every time you carry out an overseas cash withdrawal. You will also be charged the standard cash withdrawal rate for your credit card together with the international cash withdrawal fee.

What about the currency conversion rate on the day of transaction?

The exchange rate that is applied to a transaction is the exchange rate as of the day of settlement, which is the day that VISA or MasterCard determines the settlement amount to be exchanged between the acquirer and the issuer. The settlement date is therefore typically different from the date of the actual transaction. So don’t be surprised if the exchange rate you were using for calculation differs from what has actually been used, as your transaction might have been posted to VISA or MasterCard after one or two days by your merchant. The exchange rate is calculated one day in advance by Visa and MasterCard and is applicable throughout the day for every transaction at the same rate.

Where to find out the information regarding these charges?

To avoid surprises in future it’s advisable to be equipped with the complete knowledge of charges which will be applied on your credit card transaction. The data of Foreign Currency Conversion fee is available on VISA and MasterCard web sites. Please refer it just before you travel as these rates keep on changing.

Data of Foreign Transaction Charges and Cash Advance Fee is available with the issuing bank like SBI, ICICI etc. and you can call their customer care to find out the same before packing your bags. These charges are also dynamic and you might see them fluctuating at regular intervals.

How to choose the best credit card?

If you are a frequent flyer please enquire about the foreign transaction charges and cash withdrawal fees before applying for the card. You might find a difference if 1 to 2% in the offers of credit cards from various banks. Choose the one which charges you the minimum. Nothing much can be done about the currency conversion charges as they are levied by MasterCard and Visa so no point in worrying about that!

It is critical to read the offer document of the credit card provider. You should not treat it as a piece of paper, which just dies a silent death in the offer envelop. Next time around atleast scan your offer document. You will come across a lot of facts which might surprise you. The details of all the charges will be clearly detailed in the offer document. You might not find the exact values as they are pretty dynamic in nature but the rules which govern them are present in the offer document. Mind you, credit card business is one of the most lucrative businesses for the bank and it’s very easy for them to charge a heavy transaction fee.

The importance of paying the full amount cannot be stressed more as banks can charge you a hefty interest rate if you just keep paying the minimum amount due! It’s a practice best avoided. Another big no is cash withdrawal on your credit card, it’s the most expensive form of credit one can avail, so steer clear of it.

When we talk about credit card usage we find different people managing it in a different way. Some people are highly disciplined and never default on their monthly installments and others are so messy that they are always on the top of the defaulter list. Managing finance is a complex task and it’s very easy to fall into a debt trap if you misuse the power of free credit. Credit card provides you the power but it never suggests that this power is unlimited. You have to pay the dues back at the end of the free credit period but somehow the human mind doesn’t listen. To avoid getting into trouble in future it’s advisable to understand your credit personality and choose the credit card which suits you the best. Credit card companies provide credit cards with different features like different interest rate, different reward structure, different credit limits etc. If you understand the way you deal with credit it gets easier to choose the best combination for you. Let’s see what kinds of credit personalities exist and what card they should opt for.

The Beginner

You are just out of college enjoying your first job. You never had surplus money and hence no financial planning was required. You have never used credit previously and find the concept amazing. As expected, you are in a hurry to apply for one.

For beginners it’s advisable not to go for cards with high credit limits. You still do not know how you are going to use your card. Your financial wit has never been tested so better be cautious. This is just the beginning and once you are sure that you can manage your finances well, you can opt for credit cards with a higher limit.

The Disciplined

You have been there and done it all. You are great at financial planning and almost everything is in perfect shape. You never default on your monthly payments and never spend beyond your means. Reward offers don’t alter your spending pattern and you plan every move before executing.

For the disciplined the best suited card is one with cash back facility and good reward structure. The reward points should accrue irrespective of the type of purchasing done and can be redeemed at one go. Interest rate on your card doesn’t matter much as you always pay on time.

The Carefree

You love spending and believe that spending is the motivation for earning. You plan things beforehand but don’t mind going overboard at times. You cross your spending limit at times so you don’t make full payments on your credit card.

The most important feature which the carefree should look for in a credit card is the interest rate. As you carry forward the balance your interest expense is going to be high. It’s advisable to choose the card which offers the lowest interest rate. You should also make sure that your card does not have any annual maintenance charges attached to it.

The complete mess

You don’t understand financial management. Almost every time you do not even pay the minimum amount due on your credit card. All the customer care executives of the bank know you by name and are in constant touch with you. You always end up paying heavy interest and late payment charges.

For the messy it is better to use prepaid cards as it will save a great deal of money which you pay in the form of interest and various charges. This will prevent you from spending beyond your means.

The Credit Fearing

You never wanted a credit card in the first place. According to you being in debt is a crime. You applied for the card just because it made your life easy in some scenarios like booking air tickets and overseas purchases. You only swipe it in some kind of emergency and it goes unused at times for months.

The best card which will suit your needs is the one with no annual maintenance charge. You never make late payments and you are not a frequent user so interest rate and reward structure of the card doesn’t matter much for you.

Conclusion

There are a wide variety of credit cards available in the market and it’s not possible to research all of them. The better approach in such a scenario is to research your personality and then research the cards available. While you define your personality you get to know the basic traits your card should have. Once you are sure about the traits the list of cards automatically gets shorter. The best approach is to talk to the bank and discuss with the executive regarding your needs and spending behavior. They will definitely guide you with better options as banks are getting more and more cautious about their relationship with the customer. The existing competition in the market compels them to give better services to their clients. Rather than doing the entire math yourself, put forth some direct questions to them, which will help you make the best decision.

Polonius, a character in Shakespeare’s play “Hamlet” advises his son, “Neither a lender nor a borrower be”. With due respect to Polonius and his genius, credit has become a part and parcel of our life. While most of us cannot be lenders, we are bound to be borrowers because of the system we live with.

Consumer credit is a scheme to receive goods and services today in lieu of the payments made in future. When you use electricity, water, or post-paid telephone services, you are using credit, as the payment for these services will be paid later. These credits are not harmful but we have to be careful about the most used consumer credit options, i.e. credit cards, buying consumer goods on credit and easy financing etc

Uses and misuses of credit

Credit can be a great help in times of need but it can also destroy your finances if used carelessly. Using credit has two facets; it gives you immediate benefits in terms of increased productivity, conveniences, or just simple satisfaction to vanity; it also exerts financial and psychological costs. Use the credit only when the advantages outweigh the cost.

The uses of credit are humongous ranging from medical emergencies, education needs, and travel emergencies. Credit cards are usually very handy in most of these situations.

There are times when shopping stores (Pantaloon, Big Bazaar) issue credit cards jointly with a bank and provide 5%-10% cash back or discount. If you are a regular visitor to these stores, you should make use of this option. The only problem with this is that you end up shopping for things you do not need.

In today’s world, a credit card is handy to make reservation in airlines, train, or hotels. While credit helps in many cases where it increases productivity; helps in medical emergency; or builds future growth as in higher education; its misuse can ruin the finances, make you bankrupt and dilute your creditworthiness.

Just because the credit card has a bigger limit, people tend to overspend. This is best avoided alongwith taking up 0% loans on consumer goods.

In addition to these habits, people have a tendency to pay just the minimum amount required. The liability becomes huge after some time.

Managing your credit capacity

It is important to build a good credit capacity (or rating) by judiciously using the credit options available to us.  You need to consciously build a good credit score that will enable you to get higher credit in case of an emergency. Instead of driving yourselves into a situation that would require external help like that of a credit counselling agency, try to nip the evil in the bud and figure ways to manage your finances effectively. Using credit does allow you to spend more on goods and services now. But it also reduces the money you have for future needs as a part of your future income will be used to pay for the services or goods you are buying now.

Taking inspiration from what Benjamin Graham said, credit has become a reality of life as certain as death and taxes. To manage our credit better, we have to follow a few ground rules.

Here are a few beginners’ tips that can prove useful:

-          Pay the credit card bills on time. No exception.

-          Mind your credit scores. If you feel your card details have been compromised, take it up immediately with the bank, which has issued you the card

-          Pay your EMI regularly. Any default will damage your credit score and hence creditworthiness.

-          Do not use too many credit cards.

-          Avoid treating credit cards as easy money. This is the money you have to pay back with high interest if you make it a habit to pay only the minimum amount due every month.

-          Do not buy unnecessary items just because it is available on zero credit and low EMI. Remember its money spent!

-          Always try to increase your down payment when you take up a loan so that your monthly liability doesn’t eat into your savings.

Finally, credit doesn’t increase your purchasing power. It just brings future purchasing power to the present and gives you a false impression that it has increased.

Currently there is an increasing awareness about the importance of a credit score and the
impact it has on any loan who wish to opt for in future! If you are one of those individuals who plan to take a home loan a few years down the line and do not have a credit score at all, then it is time to thought of starting a credit score record, which will benefit you in the long run.

What does a score look like and what is a good score?

A credit score is generally a three digit number within the range of 300 and 900. Higher the score the better it is. This score will reflect information from several lenders and across various loans.

What information does a credit report contain?

Apart from containing all personal identification information the credit report records your repayment history if any in the case of a loan or a credit card.

Your credit card can be the single most important factor in improving and increasing your credit score. On the other hand it can also plummet your score to dark depths if you
are not careful. Think smart and use your credit cards to your advantage.

Here are some pointers on what to do and what not to do in order to achieve this reality.

No debts so far. Opting for a brand new credit card for the first time.

This makes sense for your credit score. Making use of a credit card judiciously will help
you improve your credit score. Just make sure you open your credit card with a respected and popular brand name.

Low credit limit.

Keep a tab on the credit limit of your credit card. Open a credit card account with a
company that will provide you with the highest credit limit possible. High credit limits,
even if they are not used will add merit to your credit score and improve it.

Choosing the ideal credit card to close.

The number of years you hold a credit card account has an impact on your credit scores.
Hence, let your oldest credit card be, if you must close a card opt for the most recent
cards and close them one at a time, maybe once a month over a period of time.

Bargain for a lower interest rate

If you have never defaulted on a payment for a few years, make use of your good
repayment track record and speak to the bank officials for a better bargain. Request them to lower your interest rate citing the good track record you hold with them. Keep following up with your bank from time to time and you may just get your wish!

Request for an increase in credit limit

You may have purchased your most recent card because of the higher credit limit. If at
a later date you wish to close some of your cards and you know it makes better sense to
close the most recent card, you have a dilemma. The most recent card has the highest
credit limit. The oldest card has the lowest credit limit. What do you do? In such instances, if you have a good repayment track record, approach the bank and negotiate for a higher credit limit especially since you have been their customer for quite a few years. Most banks will oblige and you can then proceed to close the most recent card if you absolutely must do so.

Keep a self imposed credit limit, which is much lower than the actual credit limit.

Never exceeding 40% of your credit limit has a very beneficial effect on your credit
score. This shows your credit limit is high but you have not burnt it up and have plenty in
reserve. This logic helps you attain a much higher credit score. This is the same logic that
suggests you should not close any credit card accounts, as they collectively will provide
you a high credit limit, which is good for the score.

Paying off credit card dues quickly will dramatically improve your credit score.

Try not to encourage too much credit card debt. Be wise and pay the dues quickly and
keep rotating your cards. Paying off dues will cause a spike in your credit score, which is
highly favourable.

Try to lower your interest rate. Negotiate with your bank. One other way is to convert your credit card debt into a personal loan debt. It will definitely be lesser than the credit card interest rate. Calculate your net worth and see if any of your investments could help you prepay a part of your loans.

Akash was an IT employee who was well settled in his career. With a take home that more than met his needs, Akash decided to invest in his future. Let us see how he managed his finances. He applied for a car loan and a home loan. The car was worth Rs.10 L, a bit of an indulgence but then he had always wanted to own the brand. He then invested in a premium  upmarket 5-bedroom apartment. His spouse Sheela tried suggesting that they should not be so extravagant but to no avail.

She had recently given up her job to take a break and spend more time with her one year old child. With no bulk savings for the immediate future she was worried about the manner in which Akash was spending the sole income they had. To top it off he invested all the money that remained from spending on the EMIs and  his monthly expenses, in stocks. This was the year 2007. They were managing fine till Akash’s stocks started tumbling in 2008. Instead of choosing another avenue, Akash started buying more stocks as they were cheaper during this period. The real shocker came when Akash was laid off when the global recession hit and his company had to cut back on resources to counter the effects.

How did Akash cope? How did he manage to pay his EMIs?

Akash did one smart thing though. He decided to approach a debt counseling centre for his financial hassles. They showed him the right way to manage his finances. They also mediated between him and his bank.

Luckily for him Sheela had an ancestral home back in her home town, which was bequeathed to her. She also had some fixed deposits and some gold that she had invested her savings in when she had an income. Based on the debt counselors’ advice, she obtained a loan against her property. She then helped Akash pay  a portion of the money towards his home loan and another portion towards his car loan as part prepayment. He also obtained written consent from the bank that he would resume repaying his loan once he got a job. In such situations banks do oblige you if you manage to repay most of the money or part of the money if not all as it was a better deal than no money at all.

Sheela whose industry was not so badly hit by the recession went back to  her old job while Akash took a break and got to spend more time with his son. Fortunately for him, his peace of mind was restored thanks to Sheela’s timely aid and the debt counselors’ help.

Six months later he managed to land a good job with a reasonably good pay, though about 20% lesser than his previous pay. He resumed his EMI payments and as banks were slashing interest rates he again negotiated with his bank for a lower interest rate. As it timed with the pressure from RBI on banks for lowering interest rates for existing borrowers also, he managed to come to an understanding with his bank. Agreed, not all can get as lucky as Akash. It was a pretty close brush with fate for him and he could have fallen in a abyss of debt! Yes…he got very very lucky indeed.

However, Akash learnt a valuable lesson for life. He started following simple but smart methods to avert a future disaster.

a. He put aside three months of his pay into a separate account meant to serve as an emergency fund. He planned to put aside 3 more months of pay into that account.

b. He ensured that his current EMI did not exceed 40% of his current income. He manage prepay his home loan at regular intervals to bring this under control.

c. He with the help of Sheela managed to keep his monthly expenses including his loans within 60% of his income and put aside the rest as savings and investment

d. When he invested now he took care to diversify his portfolio and not stick to equities alone to survive a future stock market crash.

Here are some suggestions if you are stuck in debt and do not know how to cope.

- Try to lower your interest rate. Negotiate with your bank. One other way is to convert your credit card debt into a personal loan debt. It will definitely be lesser than the credit card interest rate.

- Calculate your net worth and see if any of your investments could help you prepay a part of your loans.

- Make a contingency plan for the immediate future. Talk to your bank along with your debt counselors and explain your situation and see if you can resume your loan at a later date but do make an effort to prepay some amount.

- If it is a double income household try and see if your spouse can support you in the event of a job loss in the short term before you land a job, in case you are suffering from a lay off.

- Manage your current finances judiciously to battle through the current situation and emerge wiser.

Applying for credit cards online is not something new and we all know that many banks are offering the facility through their websites. A new twist to this is the AIP facility launched exclusively for credit cards, which has recently been introduced in India. It is getting widely accepted and found to be a very helpful product for customers applying credit cards online.

Though many banks have AIP facility for various loan and insurance products, an exclusive AIP for credit cards is something new to the Indian banking sector. If banks are armed with AIP facility, knowing whether you are eligible for the credit card or not will be relatively easy.

What is AIP?

AIP or Approval-in-Principle simply means an instant approval for online applications. The data you have submitted online will be immediately assessed by the bank with the help of a third party credit bureau, letting you know your credit worthiness instantly.

Standard Chartered Bank was the first to come up with this facility in India, so that their customers can avail a quick approval of their credit card application, subject to instant online verification and their individual eligibility.

How good it is?

Online credit card applications if equipped with AIP are not only convenient, but also very beneficial. In normal cases, when you apply for a credit card online, the request will be processed and soon someone from the local branch gets in touch with you. On physical submission of the application form in the branch, you will have to wait to get the status revealed. With AIP on board, you will be informed upfront, whether you are eligible or not.

You can forget those long hours and weeks waiting for approval, and you do not have to check the status of your application. The novelty factor is the speed with which the result is produced. And, if your application gets rejected, you can try with some other banks without wasting time or do what is required for a smooth processing.

How it works?

To avail AIP, all you have to do is, visit the bank’s site and drop an online credit card application request. You will be automatically redirected to a third party site- the site of a credit bureau where you have to enter your details to initiate verification.

If you have successfully met the eligibility norms, you will receive an instant approval. The approval is made with the help of a net based real time engine which instantly cross checks the information produced with that of the bank’s policy rules. Simultaneously, the customers’ credit rating will also be done through credit bureaus. The processed result will be communicated to the customer immediately.

Once you have got the AIP, you can get in touch with the bank to get the physical application form filled, along with the necessary KYC documents and income proof. Issuance of credit cards will be initiated thereafter.

Things to remember

AIP is to be considered as a first level approval. It is not a guarantee that you will be given a credit card in the end. It will let you know your credit worthiness, subject to the availability of documents and physical verification clearance.

Generally, if you have a good to excellent credit score and you have provided all the necessary information in the online space, you will not face any problems in getting the AIP. However, if do not meet the credit standards, your application will be declined. Or, in case, upon physical verification it is proved that the information declared by the customer on the portal is incorrect, or due to some other factors, e.g. you cannot be traced or if your KYC is unacceptable, the application can get rejected.

The service is currently available for customers applying for a credit card online and will be soon introduced at the branches and partnering retail outlets. The facility is also expected to be wide spread soon, as banks are seeing this as a way to reach out to a large customer segment.

Whenever you use your card, always ensure that the transaction is completed in front of you and that no details are written down by the merchant. Do not provide photocopies of both sides of the credit card to anyone. The card verification value (CVV) which is required for online transactions is printed on the reverse of the card. Anyone can use the card for online purchases if the information is available with them.

Sameer (name changed), is a business man, who has always been prudent with his money. Whenever he used his credit card, he ensured that he would pay his dues back immediately. He also made sure that he never used his credit card for expensive purchases, using cash instead. Imagine his unpleasant surprise, when he got a credit card bill showing that he had used up his entire credit limit. On checking his statement, he saw purchases that he had never made. He went through hell trying to making payments over those purchases. Apparently, Sameer was the victim of credit card fraud.

Credit card frauds are on the rise these days. The credit card number, the Card Verification Value (CVV) or the Card Security Code (CSC), date of birth, credit card limit, residential address (stored on your card’s magnetic tape) is all that is needed for someone to misuse your credit card.

Being vigilant while using your credit card is the only way of preventing fraud. Here are some tips.

Card Verification Value (CVV) or the Card Security Code (CSC)

The CSC or CVV number is a security feature for credit or debit card transactions, giving increased protection against credit card fraud. It is not embossed like the card number, and is always a group of numbers printed on the back signature panel of the card.

This provides a level of protection to the bank/card holder, in that a corrupt merchant cannot simply capture the magnetic stripe details of a card and use them later for “card not present” purchases over the phone, mail order or Internet.

Whenever you use your card, always ensure that the transaction is completed in front of you and that no details are written down by the merchant. Do not provide photocopies of both sides of the credit card to anyone. The card verification value (CVV) which is required for online transactions is printed on the reverse of the card. Anyone can use the card for online purchases if the information is available with them.

Using cards online

When using your credit cards for making purchases online:

• Ensure that website is a secure site. This can be done by checking whether the site is secured by a reputable net authentication agency like VeriSign.
• Do not click on links in email seeking details of your account; they could be phishing emails from fraudsters. Most reputed companies will ask you to visit their website directly.
• Do not give out your credit card details on unknown or suspicious websites.

Stolen Card and Suspicious Transactions

The first and foremost thing to do, after you have confirmed that you have lost your wallet or card or have seen suspicious transactions on your credit card statement, is to call up the bank’s 24 hour call centre and deactivate the card or inform the customer service representative about the suspicious transactions. The representative will help you file a complaint in regard to this. In case of lost cards, check if any transactions have been made on the card and if there are any; inform the bank about the ones that are not yours. This has to be done within a particular number of days which varies between 30 and 60 days according to different banks.

Some general tips

• On receipt of a new card ensure that it is in sealed condition and that the seal is not tampered with.
• Sign on the back of your new card as soon as you receive it.
• Monitor your account regularly either on the Internet or from call centers. Also subscribe to email and mobile alerts to keep track of card usage.
• Memorize your card’s PIN number.
• Destroy and dispose all documents that mention the card number, such as copies of receipts, airline tickets, travel itineraries etc.
• Personal account information should never be shared with anyone unless payment for the purchase is being done from that account.

Another important thing is keeping any useful information such as card number, expiry date, CVV number, and pin number etc. of your cards handy. However, that does not mean that you keep the information in places where it is easily accessible. Protect your card information as you would protect your money.

Finally, always stay at least 40% below your credit limit and review your account information either online or through the credit card company’s call center frequently. This will help you identify any suspicious transactions immediately.

Credit cards, though an easy way to have access to money without carrying around a lot of cash can become a big liability if not used prudently and carefully. Ensure that you use the card responsibly.

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Never exceeding 40% of your credit limit has a very beneficial effect on your credit score. This shows your credit limit is high but you have not burnt it up and have plenty in reserve. This logic helps you attain a much higher credit score. This is the same logic that suggests you should not close any credit card accounts, as they collectively will provide you a high credit limit, which is good for the score.

Your credit card can be the single most important factor in improving and increasing your credit score. On the other hand it can also plummet your score to dark depths if you are not careful. Think smart and use your credit cards to your advantage. Here is some pointers on what to do and what not to do in order to achieve this reality.

1. No debts so far. Opting for a brand new credit card for the first time.

This makes sense for your credit score. Making use of a credit card judiciously will help you improve your credit score. Just make sure you open your credit card with a respected and popular brand name.

2. Opening a new credit card account.

When you already have a couple of credit cards, opening a brand new credit card account can cause a dip in scores. By all means obtain a new credit card if you are not planning to get into more debt, else think several times before opting for one.

3. Low credit limit.

Keep a tab on the credit limit of your credit card. Open a credit card account with a company that will provide you with the highest credit limit possible. High credit limits, even if they are not used will add merit to your credit score and improve it.

4. Closing credit card accounts.

Even if you do not use your credit cards, don’t rush to close them. Keep them as long as you can. If you must close them, then do that over a period of time. Closing too many too quickly will harm your credit score significantly.

5. Choosing the ideal credit card to close.

The number of years you hold a credit card account has an impact on your credit scores. Hence, let your oldest credit card be, if you must close a card opt for the most recent cards and close them one at a time, maybe once a month over a period of time.

6. Rotate usage of multiple credit cards.

It is a smart move if you utilise different credit cards for your various different expenses instead of constantly using only one credit card for most of your purchases. Make it a point to use each credit card you have once in six months. Some credit card companies might even close your account if they feel you don’t use the card at all. In such instances, it affects your credit score. To be on the safer side, try and use every card from time to time.

7. Bargain for a lower interest rate

If you have never defaulted on a payment for a few years, make use of your good repayment track record and speak to the bank officials for a better bargain. Request them to lower your interest rate citing the good track record you hold with them. Keep following up with your bank from time to time and you may just get your wish!

8. Request for an increase in credit limit

You may have purchased your most recent card because of the higher credit limit. If at a later date you wish to close some of your cards and you know it makes better sense to close the most recent card, you have a dilemma. The most recent card has the highest credit limit. The oldest card has the lowest credit limit. What do you do? In such instances, if you have a good repayment track record, approach the bank and negotiate for a higher credit limit especially since you have been their customer for quite a few years. Most banks will oblige and you can then proceed to close the most recent card if you absolutely must do so.

9. Keep a self imposed credit limit, which is much lower than the actual credit limit

Never exceeding 40% of your credit limit has a very beneficial effect on your credit score. This shows your credit limit is high but you have not burnt it up and have plenty in reserve. This logic helps you attain a much higher credit score. This is the same logic that suggests you should not close any credit card accounts, as they collectively will provide you a high credit limit, which is good for the score.

10. Paying off credit card dues quickly will dramatically improve your credit score.

Try not to encourage too much credit card debt. Be wise and pay the dues quickly and keep rotating your cards. Paying off dues will cause a spike in your credit score, which is highly favourable.

A credit card is a useful tool, when managed judiciously but a lurking danger if you mismanage it.  One of the first things you need to keep in mind, is read the term and conditions when you apply for a credit card. It could be a laborious process but something that has to be dealt with, to protect yourself from any rude surprises that might be in store for you in times like this.

One hears stories of money being taken from the savings account of a person who has a credit card with that particular bank! Well, banks are allowed to do so, when a default occurs, the clause is covered in the terms and conditions. Banks also have an auto debit facility to claim a minimum payment on credit borrowed, if in case your account does not have enough funds, banks are allowed to levy a fine, which could be ridiculous amount that is nearly half the amount you borrowed! For eg. It’s not funny when a fine of Rs.400 is charged for a Rs.500 credit borrowed!

Credit cards can be useful when you make a profit out of it! Now, how is that possible? Well, it all depends on the kind of card you purchase, its best to opt for a lifetime free credit card that does not have an annual fee attached. Also get a card that matches your lifestyle. If you shop a lot, see that your card offers a lot of discounts and cash back rewards for the all the shopping you do with a card. If your job allows you to make frequent trips, get a card that gives you several travel friendly schemes on eating out, hotel stays and airline ticket discounts.

Though the whole point of having a credit card is to provide you with cashless convenience, it makes money sense to decide, when, how and why you should use it. Never get tangled in the web of debt, especially when it comes to credit cards. Though its an ideal resource to tap into, when you need to ramp up funds quickly, the interest rates charged on a credit card are much higher than even those charged on personal loans. Remember that cash withdrawals from an ATM with your credit card will be charged a processing fee of around 2% and an even higher rate of interest than your regular purchases on the card.

Most credit cards do offer an EMI facility to pay any loan you take on your credit limit. It normally takes just one or two business days to obtain this loan and this can even be arranged over the phone with no documentation. However, the difference lies in the high interest rate charged, which can be as high as 30-42% as an annualized rate. The cards that offer a comparatively lower interest rate in the range of 22-26% most often do not have an EMI facility for repayments.

Though credit cards seem like a good bet for short term fund requirements refrain from using it, unless you can make the credit card usage count for some kind of benefit. Using your credit card purchases for an interest free period is fine, however remember the bank can do away with interest free periods anytime it chooses to and also hike the interest rates, according to its free will. Hence, be wary of a credit card and use it sensibly.

In case you have lost or have been robbed off your card, you’re in double trouble- your card could be used for a fraudulent purchase and you lose the convenience to pay though the card. Besides, you may have lost all your other important documents such as pan card, driving license etc. which may have been in your wallet that has now been stolen. Look for a ‘Card protection plan’ to help you with such dilemmas.

Credit card information is privy and prone to theft. Therefore it is your responsibility to keep it safe from miscreants who may illegally use it and make you pay the price for the same because after all, you are the owner of the card. It is therefore important that precautions are taken so that you do not have to pay financially for the misdeeds of others. Take note of the following-

Avoid giving out credit card information: Credit card thieves are known to pose as credit card issuers to trick you into giving your credit card number. Therefore give your credit card details only on the calls initiated by you to the customer service number. Also do not submit your credit card number through email. As a general rule, most banks and credit card companies will never request your account numbers via e-mail. No matter how official, credible an e-mail or website appears to be; if it is asking for sensitive information you can safely assume that it is not genuine. In fact, most banks explicitly state that they will never approach you for such information through email.

Shred anything with your credit card number on it: In order to prevent anyone from getting their hands on your credit card number, make sure that all documents carrying your credit card number are destroyed. Also, old credit cards which have expired should also be destroyed.

Report lost/stolen cards immediately: The sooner you report a missing credit card the less likely it is that you’ll have to pay for any fraudulent charges made on your credit card. Make sure you always you’re credit card number handy and also the customer services number of the company so that you can immediately inform them of a missing card.

Review your bills on a monthly basis: The easiest way of determining any credit card fraud on your card is by spotting any unauthorized transaction. If you notice a charge that does not belong to you, no matter how small the amount, report it to the credit card issuer on an immediate basis. Your credit card issuer will then guide you on what the future course of action should be.

Sign on the card- The moment you receive your card, make sure you put your signature on it. Although, it is mandatory to do so, some of us tend to ignore it, and it then can be easily misused if it falls into the hands of some miscreants. That’s because the person can put his own signature on the card and start using it without creating any suspicion while transacting with various merchants.

Keep your PIN secure: Make sure you do not write the PIN on your card or you do not keep it accessible anywhere in your wallet. In a scenario your wallet being pick pocketed, both your card number and pin number will be available and cash can easily be withdrawn on the credit card.

Be careful of your CVV number: The CVV number can be used for online transactions. So anybody knowing your card number and your CVV number, can do online transactions (purchase of air tickets, equipments etc). Therefore, do not give a photocopy of both sides of your credit card to anyone. Also make sure that the websites on which your transacting online is safe and secure. For that, look for the lock on the bottom right corner of the screen.

Opt for a card protection plan: In case you have lost or have been robbed off your card, you’re in double trouble- your card could be used for a fraudulent purchase and you lose the convenience to pay though the card. Besides, you may have lost all your other important documents such as pan card, driving license etc. which may have been in your wallet that has now been stolen. Look for a ‘Card protection plan’ to help you with such dilemmas.

• What is a Card Protection Plan?

It is card protection service that can be used anywhere in the world when your card has been lost or stolen. All you need to do is call the CPP toll free domestic/international number as the case may be, which is a 24 hour service and inform them of the loss or theft. CPP in turn will inform all the issuers and get the cards canceled.

In addition, CPP will also help you in your travel, hotel bill payments to the extent of the coverage of the product you have chosen. Also you will get help on getting your documents done such as passport, driving license and new cards among other things.

You need to buy this product for which annual charges need to be paid. Then you need to register all your cards and all the documents you deem necessary.

Two types of products are available- Classic and Premium. The yearly charges are

• Classic- Single user- Rs. 995; Joint Card user: Rs. 1495
• Premium- Single user: Rs. 1295; Joint Card user: Rs. 1945

Cardholders can choose any of the above plans depending on their needs. Customers can be covered for fraud loss on their cards for an amount up to Rs. 1 lakh prior notification and Rs. 20 lakh post notification; overseas emergency assistance for payment of hotel expenses of up to Rs. 1.2 lakh and Rs. 60,000 in India; and replacement travel ticket advance of Rs 1.2 lakh while overseas and Rs 60,000 whilst in India.

This plan doesn’t cover online frauds. So if your card is misused for online transactions by a third party, CPP does not protect you.

There is no cap on the number of cards that you can register for protection under one registration/membership. You can choose to register all your financial and non-financial cards such as membership/loyalty cards as well as other valuable documents such as driving license, passport, PAN card and any financial certificates.

• Why should you opt for a CPP?
  • One phone call to block all the cards: In this plastic world, having an average of 2-3 cards is not uncommon at all. In case of a loss, the CPP requires you to dial only one toll free number which is available 24 hours. CPP will undertake the task of canceling all your cards. The card holder is thus saved from the trouble of calling all the credit card issuers separately.
  • Fraud protection: You get worldwide protection against fraudulent use of lost or stolen card. Fraudulent protection is available pre-notification i.e. 7 days prior to reporting your card loss or theft and post notification.
  • Emergency travel, hotel assistance and document registration: If you’re stuck anywhere in India or abroad because you have lost all your cards, under CPP the worldwide emergency assistance will facilitate your tickets and hotel payments if your card is lost or stolen. You will also be able to opt for their help in getting your documents such as your passport or new cards in order by providing the necessary notifications and contact numbers.

Plastic money has gained prominence in the last few years because the modern day Indian consumer has taken a liking to cashless travel. The convenience offered by credit cards to pay off bills, movie tickets, and other related transactions has resulted in an increase in its usage manifold. But there are also associated risks which you need to be aware of. Use it to serve your need but at the same time take all the care to avoid finding yourself in a spot of bother.