Young individuals are inclined towards having their own credit card for financial freedom. But along with freedom, there is a huge responsibility of using it in a right way.
A credit card can be a bane if it is not used in a proper way. One needs to know how a credit card works and what are the disadvantages.
Here are must-know points for first-time credit card users.
1) Outstanding amount
Considering to pay 90% of the outstanding before the due date? This cannot be of much help as the company charges you interest on the whole amount!
2) Minimum payment
Making minimum payment will save you only from the late payment fine, but interest charges remain applicable. This is only to save you from bad credit score.
3) Cash advances
Any cash withdrawal made on a credit card will attract high-interest rates which are almost double to what you would pay on personal loans.
4) Other charges
If you miss the due date, you will be liable to pay monthly interest on outstanding, which will be charged along with late payment fee and service tax.
5) Grace period
One should note that the amount swiped should be paid within the grace period of 40-45 days depending on the company. What this means is that interest-free period is only for 40-45 days.
6) Interest Rate
The institution can approximately charge around 3.5% as interest per month. The interest rate can vary depending on the type of card.
7) Credit Score
Small negligence of payment or over use can impact on your credit score and it may take lot of time to improve your score.
8) Cash withdrawal transaction charges
There is a 2.5 per cent transaction charges that would be applicable. So, if you have withdrawn Rs