There are various forms of short-term credits like microfinance, EMI schemes and credit cards. They provide credit card based on CIBIL Score. These instruments provide you short term credits so that you make such transactions where you do not have liquidity and anticipate it in near future.

What is Credit Card?

Credit Card is basically a kind of credit facilities which has a limit of credit as per your income. It is ascertained by the documents related to income from salary or business. Limit may me enhance once income increases. KYC is also done before issue of card. It provides interest less credit period of 45 to 50 days.

How to use credit card responsibly?

First of all, credit card is the means of short-term credit facility. Hence it should not be used for either cash or kind of loan where you pay only minimum amount due (MAD) that is 5% of total amount due. Hence, you must make sure that you use credit card to the extent that you are capable of paying total amount due (TAD) by the due date after billing cycle. Generally billing cycle most banks prefer is 18th to 17th of each month and due date to pay TAD/ MAD is generally 5th of a next month after billing date.

Where we make mistake in CIBIL Score and what are the results?

Use of Card as if You Do Not Need to Pay

Generally, when we used credit card, we are generally not serious about the limit of expense as per our paying capacity. There may be some emergency to it, but most of the times we use it as if we do not need to repay it. This psychic compels the person to use credit card and then default TAD/MAD payment. It results into paying a kind of penal interest of 36% to 48% per annum.

No Knowledge About the product.

Generally, credit card sellers do not provide complete information about interest rates, penalties, various fees on renewals and transactions. Though all the information is available online. However hardly people go through it thoroughly. It results into non payment of TAD and even MAD for months. And once all the dues are compounded, the TAD converts into huge amount and surprises customer.

Impulsive Use of Card.

Most of the People Use the Card for Status Symbol and Cross the Spend Limit vis-à-vis Their Repayment Capacity in Due Time. It Must Be Used Judiciously and Only Mandatory Spend Should Be Made Out of It. All Other Expenses Should Be Done by Debit Card. It Helps in Keeping the Monthly Finances in Control.

What All Steps Are There to Ensure Your Card Does Not Dent Your CIBIL Score?

Never Spend Beyond the limit.

You must know about billing cycle and due date of payment of your card. Never go beyond the limit in spending through card which may not be paid fully by you within due date. If you spend more, you need to pay MAD. However, paying MAD also affects your Credit score negatively. If you skip payment of even MAD, your credit score goes down even faster.

Listing of expenses.

Please make sure to prepare list if item/ services are prepared before you use the card. It will help you keep strict control over use of card. Mall culture instigates people to make non mandatory buy by display of all the items and services. Hence we, generally, spend 30-40% more than needed.

Converting of Buy Into EMI.

When it is compelling to make a big purchase through cards and your financial condition is not such that you could pay TAD, then you must convert all or most of your Credit Card Transaction into EMI for 36 to 48 months. It is better than paying only MAD. And even the amount of MAD and EMI for max tenure are almost same. This way your Credit Score will not go down.     

Never Use Your Card for Loans.

There Are Various Loan Products in the Market for All Kind of Profiles. We Should Never Use Credit Card for Taking Loan, Unless is Emergent. Because Its Processing Fees, Interest and Foreclosure Fees Are Very High.

So friends, Credit Card are an excellent tool by which you have a handy credit facility with you. However it needs lots of knowledge and restrain over unnecessary transaction to enjoy your credit card as your personal short term lender. And surprisingly its without interest, if you always pay your TAD timely.

Happy Spending

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