One of the reasons why the ratio of debit card and credit card holders in India stands at around 24:1 is because buyers consider a credit card as a debt-increasing medium.
However, if used knowledgeably, credit cards can be more beneficial than debit cards. A vital benefit to consider is the grace period of up to 45 days for repaying the availed credit without additional interests or charges.
Thus, when that item in your wishlist is available at a considerable discount but it’s the end of the month, you can purchase it with a credit card and repay the amount later.
However, if you are unable to repay the whole amount within the due date, you will need to pay additional charges which include interests over the total outstanding amount other than late payment fees.
A large section of credit card users often find themselves in debt. Credit card debt tends to accumulate and multiply over time. What you need to do is plan your expenses and overall finances smartly to navigate out of your credit card debt.
Here are a few things that you need to know:
Keep the credit utilisation within 30% of your credit limit
Not only do you need to keep your expenses in check, but you also have to ensure you don’t spend more than 30% of your assigned limit. Doing so makes you look credit hungry. Furthermore, it also lowers your credit score considerably. You will find it troublesome to avail credit in the future if your CIBIL score drops below 750.
Make payments on time
You have to pay a high rate of interest when you miss the payment deadline. Companies may also charge you late payment fees for the same. Missing the bill due date, then, significantly impacts your CIBIL score.
Convert your debts into EMIs
Credit card companies give you the option of repaying your bill in easy EMIs. Thus, you can easily convert your total debt into affordable monthly instalments.
You can also transfer the amount due with your card to another card that you own and repay with EMIs. You should avail this balance transfer facility if another card offers a lower rate of interest on EMIs. This helps you make your repayments even more affordable.
Generally, late payment interest rates are about 3 times than that of EMIs. With each EMI payment, your credit limit will increase consecutively.
Make sure to pay at least the minimum due amount
Financial institutions give you the option to pay a minimum amount when you can’t pay the total amount due. The minimum amount will be considerably lower than the full amount and is calculated based on different parameters.
For example, they charge a specific percentage of the total amount due as the minimum amount. It is the interest you are paying, which eliminates the need to pay any other penalty charges.
However, the total amount due will be carried forward to the next month. Also, your credit score will also go down when you opt to pay the minimum amount.
Defaulting on payment will invite severe consequences
You must keep the consequences of defaulting in mind before you apply for a credit card. The card company will block your card and also blacklist you. Defaulting on payment will further leave a negative mark in your credit score and report. As a credit defaulter, you will find it considerably difficult to avail loans or credit cards in the future.
Keep the above-mentioned points in mind when you apply for a credit card to handle your debts efficiently. You can go with the Bajaj Finserv RBL Bank SuperCard. Along with all standard features, this card provides an interest-free loan of up to 90 days and interest-free cash withdrawal from ATMs across the country up to 50 days.
However, if you comply with the civil suit, then you will need a lawyer. In case you show a false or illogical reason for non-payment, you may be prosecuted under the following:
- Dishonest misappropriation of property under Section 403 – Up to 2 years of imprisonment.
- Cheating under Section 420 – Up to 7 years of imprisonment.
So, it is always better to pay your bills on time and maintain credit card eligibility for future purposes. You can convert your outstanding card dues into easy EMIs if it becomes a burden.