Credit Card Basic - Good Practice

In this blog, I will try to highlight all the good practices you need to follow to get the best use of a credit card and how you can avoid the loan trap which comes with credit card usage.

First I will go through all the abbreviations & terms used in the context of a credit card.

1. Credit Limit - Depending on your profile and CIBIL score bank gives you a credit line/ amount which is kept aside for your usage.

2. Billing cycle - Every bank gives a billing cycle of 30 days with their credit card means if a credit card is issued on the 5th of Jan then your billing cycle starts from the 5th Jan till 4th Feb and on 4th Feb your bill will be generated for all the spends you did in last 30 days.

3. Bill date - The date on which a bill will be generated for spending done in the last 30 days.

4. Due Date - After the bill generation date, the bank gives you additional 15 days of grace time to pay your bill and the last date of this grace period is the Due Date. So in total, you will be having 45 days to pay back to the bank if you have spent money on 1st day of your billing cycle.

5. Total payment Due - The amount you have used in your billing cycle (last 30 days) is the total payment due which you have leverage from bank and need to be paid before Due Date.

6. Minimum payment due - Minimum payment due amount is 5% or Rs 100 whichever is more of your total payment due to keeping your credit card active for the next billing cycle. If you miss this payment then the bank will block your card after inquiring you for the reason and will try to recover all the amount you have used with interest from your credit limit.

7. Late Fee: If you miss a payment before the due date and try to pay in another one or two days then Bank will charge you a late fee when you are trying to pay the "total payment Due". It can be in the range of Rs 250 to Rs 500 depending on bank policy .

I have been following below rules for myself and avoided any extra change bank can apply to me. So you can also follow these rules if you agree with me that this will help you as well.

• Always make sure you have that money in your bank account that you are spending through a credit card. This way you will able to pay in full when a credit card bill is generated.

• Once a credit card bill is generated, always make sure you pay the total payment due amount by rounding to the upper number. Never just pay the minimum payment due , this will allow the bank to start charging you from 30% to 42% per year on the remaining amount from the day you have spent that money in your billing cycle, not from the bill generation Date.

• Understand the above point with an example, if you have spent Rs 10000 on 5th Jan and your Bill generation Date is 4th Feb which shows you have to pay a minimum due of Rs 500 and total payment Due as Rs 10000 and your Due date is 19th Feb, If you just paid the minimum due of Rs 500 then the bank will start charging you 42% per year interest on remaining Rs 9500 from 5th Jan..

• Always try to pay the total payment due amount before due Date at-least 2 to 3 days before due Date , so that you can avoid any unwanted circumstances like amount credit delay caused by bill payment applications or third-party bank or bank holidays.

• As per RBI rule, every bank has to give one chance to credit card holders to modify their Bill generation date. Try to use this option and modify the bill generation date of all your credit cards on the same date, my suggestion will be the 20th of the Month so that Due Date will be the 5th of the next month and if you are a salaried person then easily you can clear your due on time with last month salary.

There are some spends that you should avoid on a credit card as credit card bank has started to charge you extra money if you use their card for these purposes.

1. Rent payment.

2. Withdraw cash from ATM using a credit card . Interest will be charged from Day 1 when you withdraw cash, in addition, you need to pay cash withdrawal charges which are around Rs 250 to 500 depending on the bank.

3. Fuel pump - You need to pay a surcharge plus GST on the surcharge amount if you want to refill for less than Rs 400 and mostly surcharges will be waived off starting from Rs 400 on most of the cards. Also not all credit cards will waive off the fuel surcharge on every petrol pump so please check, in the case of Amex only the surcharge is waived off on the HP petrol pump.

4. Forex transaction - Any foreign transaction done on an online site or transaction done outside India through a swipe machine with attract forex change from 3.5% to 1% depending on bank.

5. Wallet load - Now wallet fintech company has started charging you from 2% to 4% as a convenience fee and you will not earn reward points or milestone targets.

6. Credit card to bank transfer through anyway.

7. The personal credit card should not be used for Business purposes otherwise Bank can close or block your card without any notice.

Bill Payment Applications :

Paying bills on time is one of the important rules which can't be missed, So i am trying to go through all best options currently available to pay your bill .

Currently, in market we have many applications like Paytm , Mobikwik , CRED and Cheq which provide an option to pay your credit card bill and earn some rewards.

Currently, CRED and Cheq are the two popular apps that are mainly used by credit card users in India. I will try to share what i use mainly and my experience with CRED. I tried to use the Cheq app as well but it's too early to ask my blog viewer to use it. Once I use it for a couple of months I will share my experience on Cheq app as well .

• I use CRED app for the last 4 years and its been present in the market for the last 4 to 5years. I never experience any bill payment delay or any problem in bill payment to date.

• CRED mainly allow the user to register all their credit card in one place and it will fetch your bill on time from your mailbox by asking your permission to access your mailbox for the first time.

• It has all major banks linked to pay through Debit cards, Net banking and UPI.

• Through this app you will able to pay all your bill on time and clear all your dues.

• On top of all these feature, it will give you some cash rewards for bill payments. This cash reward percentage is reducing day by day, but bill payment through CRED is still smooth and faster.

Conclusion: Please try to follow the above suggestion and you will never face any issues using a credit card. As per me "credit card is best instrument provided by bank to smart people."

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Thank you for reading this blog. If you are interested in applying any new credit card or bill payment app you can use my referral. This way you can support this blogging site and encourage me to add more blogs like this .

CRED : https://app.cred.club/spQx/a0qy8q22

IDFC Crdit card : http://idfcfir.st/lpgmpxq

Amex : https://americanexpress.com/en-in/referral/jENARMlIAc?CPID=100506080

Cheq : https://app.cheq.one/3UIC/rs8raj18

OneCard : https://1cardapp.page.link/EoxH

SBI Card : https://www.sbicard.com/invite/2NrTMzRTwxL