Sunday, June 6, 2021

5 things I learnt from using credit cards for the last 13 years

Believe it or not, I got a credit card at the age of 19. I had my own customized gifting business, and my bank with whom I already had a savings account gave me a credit card just on the basis of my business card, that is all! I sometimes wish it wasn't so easy, and I wasn't so careless. But I wanted to share what I have learned, so that it may benefit any other millennial who is considering getting one or has just received one.

1. Annual Charges


Most credit card companies will lure you into getting one with offers like a free shopping voucher or no charges for the first year and so on. Make sure you know what the charges are from the second year onwards, as it could be something like 1-2K per year too! I had a credit card that I was not even using and it was frustrating to pay Rs.700 just for nothing, even the bank doesn't give as much interest tbh.

2. Jitni chadar ho utna hi pair failao


Quoting a popular Hindi muhavra, what I mean to say is don't use your credit card over your income or ability to pay back. The lucrative credit limits may make you feel like God, but remember, if you're not paying it all back in one go, you're paying the bank hefty interest charges, and when I say hefty, I am not even kidding. In fact, even when setting a credit limit, I would recommend keeping it lower, when the bank offers to increase it, politely refuse.

3. EMI's - the good, the bad, and the ugly


Most of us get a credit card because we want to be able to buy expensive gadgets and other commodities on EMI. While no-cost EMI certainly are wonderful, I advise you to opt for the shortest duration possible for you. Always go for 3-6 month EMI's instead of 12-24, for multiple reasons. The first being that obviously you will have to pay more interest to the bank, and honestly even if the amount is small over time it starts feeling like a burden. Imagine using your new phone for months, or going for that international holiday for a week and the next year you're still paying for it - that doesn't feel very nice. Been there, done that. And you may also fall into a habit and before you know, every month your statement comes to big figures and you're paying for EMI's which you did not even remember in the first place, that may put you off your money management for that month.

4. Consider credit card as an emergency fund


We all see hard times, you never know when an emergency may come up - like hospitalization due to an accident or sudden health issue. Having a credit card can make you feel at peace for when such a day arrives so that you get instant funds and then have a month or so to figure how to pay it back. Whenever making transactions using your credit card otherwise, ask yourself if you could pay for it via debit, ask yourself if you can push this expense to the next credit cycle. In fact, so many times if I want to buy something and my credit cycle is about to renew, I wait till that happens so that I get more time to pay it back.

5. Utilise those points


Many of us, especially I have noticed one generation above, totally forget that their card collects points for using it - which you can redeem for gift vouchers, products, or even cash back! Don't forget to redeem  - the joy of free vouchers is amazing. Also, don't fall for fraudulent messages that say your points are about to expire and lure you into sharing your card details and OTP, before you know it, your money will be gone.

Hope my experience helps you! If you're a fellow CC user who has some more tips to add, please add in comments!