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Top 8 Lessons About Credit Card To Learn Before You Hit 30

Using plastic money instead of hard cash is a good step and a credit card is another way to use Plastic money. A credit card is issued by the financial institution with the pre-approved limit, which means customers can borrow money from the institution. A maximum ceiling of borrowing is pre-approved. This limit is based on the customer’s credit score and transaction history. The difference between Debit Card and a credit card is that while you swipe a debit card money is deducted from your savings account but if you swipe a credit card that money gets deducted from the pre-approved limit

In the case of a credit card, you get a Grace period which may be from 20-45 days. You have to pay your bill without paying anything extra in this period but if you fail to do so the then interest will be charged heavily to the bill.

credit cards and its usage

Types of Credit Cards:

There are various types of cards issued by the service providers available in the market. An individual can choose among them depending on their specific requirements and facilities provided for the cardholder by issuing authorities such as banks ( State Bank of India and other Private banks)

Standard cards

These are the simplest among types of credit cards and comes with no extra rewards or advantages. If you want nothing else but only a credit limit then you can go for this. It is easy to understand and as you pay the bills in time, it will restore your limit that’s all.

Balance transfer credit

These cards have a facility to transfer the balance from other credit card-carrying high-interest rates to save money. But these types of credit cards usually come with a condition that a minimum of two transactions a month is necessary with the credit card. 

Reward cards

These cards have reward points associated with the use of the card and the company provides you with reward points for using their credit card. Based on the type of reward, cards can be of reward point type, travel type, or cashback type.

Charge cards

These cards usually don’t have a pre-approved limit as other cards have but here you have to pay the full amount of the bill at the end of the month and good credit history must be there to avail the facility of this card.

Secured Cards

These cards are for those people who have a very low credit score or damage their credit history. Those people must have some security lying with the bank so that bank can issue a credit card to them for their securities deposited. Generally, the bank asks for security in terms of a fixed deposit and they will issue a card. The credit limit for the credit card will be equal to or less than the deposit made against that card.

Limited purpose cards

Limited purpose credit cards are designed to be used for specified purposes only like fashion stores, oil credit cards, and cardholders will get incentivized for using the card at specified outlets or for products.

Types of Fees on Credit Cards

You will be issued with a credit card by the company with some charges. These charges over the card vary from company to company. Any credit card usually comes with three types of fees on the consumer are Transaction fees, Interest fees, and Annual Fees.

Transaction Fees

Transaction fees or charges are those which are charged by the merchant or company on every transaction. These fees can be volatile depending on the product, outlet of product, the purchasing capacity of the holder, and also on the type of credit card you are using. This type of charge is negligible or not at all present in the usage of credit cards because it promotes the customers to use cards against cash.

Interest fees

Interest fees are charged by the company from the consumer when you do not pay your bills on time. Card companies disclose the rate in their policy or documents at which interest will be levied to a customer, but in actual the interest charged will be more than that. So, it is advised to pay your dues or bill well before time otherwise card will be a burden on your pocket.

Annual fees

Annual fees are charged by the provider from the cardholder for maintenance of the card or for providing the services in a year. Normally companies deduct annual charges in advance and you should be aware of the annual fees and all before taking the card. Many providers offer credit cards with no annual fees also, you can go for them as well provided you have limited usage and are not fond of extra facilities and reward points.

Other than these, some minor charges must be known for you to utilise the card well like Charges for issuing Duplicate statements, fees for late payment, cash withdrawal charges, fees for using a card for over the limit, GST and transactions abroad fees.

Things to do while using a credit card

a) Use the Grace period effectively

b) Choose the right card depending on your need

c) Use credit cards online to make rewards points

d) Redeem rewards points timely before they get expired.

e) If completed one large transaction then convert it into EMI. But only one can be converted to EMI in a month.

f) if possible, pay the total amount dues and don’t go for paying the minimum amount due as it will levy heavy interest on you. I don’t prefer the minimum amount is explained at the end, and please go through it carefully.

g) Use a credit card only when you are certain to pay dues in time else it will lead you to trouble and disturb all your financial health.

h) A credit card is best for one who is earning on the fixed interval or salaried one.

i) Remember to get your card back after each transaction.

j) Never sign an incomplete charge slip

k) Keep your card safe and always in case of suspicious activity with card immediately report to helpline no and block your card.

l) Please don’t disclose any of your card or account details to anyone.

m) Keep your Mobile no/Email updated for each transaction alert

Advantages of Credit cards

a) It is safe to have a card than to carry cash in hand.

b) Using a credit card makes credit rating of the individual.

c) Use of Grace period or interest-free days.

d) Reward points on online purchases using credit cards.

e) It can be used for any currency overseas as well.

f) In an emergency can be used as a debit card to have cash in hand provided u have to pay heavy interest.

g) Purchase in bulk amount and can pay in easy EMI.

The disadvantage of Credit Card

a) The high rate of interest.

b) Credit card is prone to online frauds.

c) Taking cash out of an ATM using a Credit card is very expensive.

d) Annual Fees and other hidden charges.

e) Sometimes you can be charged with extra surcharges for usage above purchase limits, using the card abroad, fees for reward programme etc.

How you can pay credit card bills

Bill of Credit card can be paid in many ways out of the following:

⇋⇂Pay online using net banking

⇋ Using mobile banking application

⇋ Pay usinG UPI methods

⇋ Use NEFT

⇋ Auto Debit from Account

⇋ Use ATM to pay bills

⇋ Over the counter payment

⇋ Electronic Drop Box

CIBIL (Credit Information Bureau of India LTD)

It is a repository of information that contains the credit history of all borrowers. It specifies the credit score in respect of each individual by looking at many factors such as loan repaying capacity, transactions, etc. The consumer must have a good credit score before applying for a card and also, applying for a card also lowers the credit score.

5 ways to improve Credit score:

⇋ Make at least a minimum amount due each month ( which I don’t prefer usually ).

⇋ On-time payment has the most positive impact on the credit record.

⇋ Maintain a reasonable level of credit.

⇋ Use a limited number of credit cards as having a large number of cards hurt your credit history

⇋ Use credit cards judiciously and must not touch your credit limit.

Why not to pay the Minimum amount in credit card bill

⇨ The minimum amount is 2% of the outstanding balance and if suppose outstanding balance on your credit card is 5000 Rs then the minimum amount is 100.

⇨ Now if you want to pay a minimum then these 100 rupees will not be deducted from your outstanding balance as a whole.

⇨ A finance charge will be made by the company to the consumer which is @1.5% of the outstanding balance ( 1.5% of 5000 = 75 Rs. )

⇨ This Finance Charge amount will be first deducted from the Minimum amount due. So here first this 75 will be deducted from the minimum amount due to i.e 100.

⇨ Now the remaining 100-75 = 25 Rs will be reduced from the outstanding balance.


⇨ So the outstanding balance for the next month will be 5000-25 = 4975 Rs.

⇨ So now you can see, how this cycle will continue for years if you are opting to pay the minimum amount each time and you will end up paying heavy money in terms of charges to the company.

⇨ That is why I request that you please pay the full outstanding amount as soon as possible if possible.

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