Get Best out of your Credit Card

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Buying something expensive is no longer a problem. From that designeroutfit to the most recent gizmos, you can get it all with a swipe of acredit card. But is it as simple as it sounds? Should you get carriedaway with those flashy ads and promos telling you how easy it is to buystuff? Let's find out.

Whether dining at a restaurant, doing your grocery shopping or makingthe latest purchase, the most convenient mode of payment today is thecredit card.

But wait a second before you swipe it -- do you know how to make thebest use of your card? Which brings me to another question -- do youever wonder why so many banks chase you with the offer of a free card?The answer is simple; it's the hefty interest rate (as much as 36 percent per annum) that they charge when you don't pay your credit cardbill on time. This interest is a lucrative source of revenue for them.

Understanding credit cards

A credit card is issued by a bank or a credit card company; it permitsyou to make purchases or pay your bills without using physical cash.The most important benefit is that you get a leeway of 20 to 50 days tomake your payment after you use the card. Your bill is calculated fromthe date of billing. The time between each billing cycle -- which isthe billing date between one month and the next -- is known as the'interest free period'; however, if you do not pay your bill on time,you will be charged a hefty interest.

The second flexibility that you get is the choice to make the paymenteither at one go or on a monthly installment basis. Though this optionbecomes more feasible in terms of easy payment, watch out for theinterest rate that can go up to 35-43 per cent annually.

Ask yourself basic questions

~ Why do I need a credit card?

~ Is it because it is easier not to have to deal with cash or is it because everyone else has one?

You must realise there is no such thing as a 'free lunch'. Why wouldanyone offer free credit cards or even free add-on cards? Add-on cardsare offered to you if you pay your bills regularly or have a goodpayment history. These cards can be in the name of your father/ mother/spouse/ child; they can use the add-on card for making purchases. Itfunctions exactly like your own credit card. Of course, the purchasesare billed to the main credit card owner's account.

Whenever you swipe your card, it comes to you at a cost. You usethe credit card to your advantage when you clear your bill within the'interest free period', which is generally between 20-50 days(depending on the billing cycle).

Credit cards broadly fall under four categories -- regular, silver,gold, platinum. Each offers more facilities and each is more expensive.

Before you make up your mind to own one, do not forget to run asearch on the maximum benefits you could avail of under a particularcard. For instance, some credit cards offer discounts on airfares,retail shopping, etc.

So, while choosing the right card for yourself, know the costs involved and the benefits you can enjoy.

What else should you know

Once you start using your credit card, the card company sends you amonthly statement list of the purchases/ payments you have made withthe card. You will have to pay this bill within a certain number ofdays. Don't ever forget that you will be charged a high interest rateif you don't pay your bill on time, that is before your due date.

Generally, a credit card finds a place in your wallet because ofits 'free credit period', also known as the 'grace period'. This meansyou don't actually pay for something as soon as you buy it using yourcard. You pay for it when the credit card bill is delivered to you.



The number of 'free' days that you get depends on the statementdate and the transaction date. Generally, a time frame of 20 days isgiven, but if you plan purchases smartly, you may end up getting even50 days of credit. This means that, if your billing date is today andyou buy something tomorrow, you could get 50 days of credit. However,if your billing date is today, and you bought something using yourcredit card two days ago, you will only get a benefit of 22 days.

Make the best of your card

1. Pay your bill before the due date. If you are not able to do so,use the transfer balance facility through which you can transfer thebalance amount on your bill to another credit card issuer and pay fewercharges.

2. Do not use the cash advance feature (where you can withdraw cashagainst your card just like an ATM) unless it is very crucial; theamount you withdraw does not qualify for an interest free period. Theinterest rate charged on such withdrawals ranges from 25-30 per centper annum.

3. Know your credit card's billing cycle, the actual date of when itbegins and ends. Make your purchases in such a manner that you getmaximum free credit days.

4. Don't own multiple cards. Stick to a maximum of two cards. Morethan that and you will find it difficult to keep a track of how muchmoney you are spending.

5. Always clear your credit card bills at least seven days before the due date to avoid being hit with a late fee.

6. Before you choose your credit card, take suggestions from your friends/ relatives.

7. Keep the receipts you get when you use your card; use these to check your bill when it is mailed to you.

8. Keep your card and your 16 digit credit card number confidential.

9. If you have more than one, carry only those that you think you will need when you leave the house.

10. Look out for cards that give you the highest free credit period.