Important things to keep in mind for first time credit card users

Credit cards are like ordinary debit cards with the only difference of unsecured credit availability all the time.

Dec 11, 2015 10:12 IST India Infoline News Service

Credit, as the name suggests, is the secured/unsecured debt that one takes during an emergency situation. Credit cards are like ordinary debit cards with the only difference of unsecured credit availability all the time. In simple words, one doesn't need to have balance in his bank account to make payments through the credit card.
 
So, if you are lured by this concept and want to apply for a credit card for the first time, here are a few important things that you need to keep in mind-
 
Interest Rate
 
The concept of credit card is quite fascinating. You can buy anytime, without liquid cash, using your credit card even if you don't have enough balance in your bank account. However, the one thing that people forget is the penalty that is levied by the bank if they fail to make the payment before the due date. In most of the cases, the interest rate on credit cards varies between 22%-48% annually. Thus, look out for the interest rate before you apply for a credit card.
 
How long is too long
 
It's not that everyone has to pay a whopping interest on all the transactions done through credit cards. The interest-free credit period offered by banks range between 20 days and 50 days, thus, apply for a credit card which offers maximum number of days as interest-free credit period.
 
Other bank charges
 
Wait before you think that you can escape from late payment charges by paying one-time interest fees between 22% and 48% of the outstanding amount. In addition to this interest rate, banks also charge service tax of 14% and Swachh Bharat Cess of 0.5% on the entire outstanding amount.
 
You Can Withdraw Cash Using Credit Cards
 
It is assumed that credit cards can only be used to make online or POS payments; however, one can also withdraw cash using credit card. The important thing here is the cash withdrawal limit, which is lower than the overall credit limit assigned to the holder by the bank.
 
If this is your first time experience with credit cards, keep the points mentioned above in your mind before taking any decision.

Related Story