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Misuse makes credit card dangerous
Published on Sun, Nov 05, 2006 at 16:41, Updated on Sun, Jan 21, 2007 at 17:42 in Money » Tax section
Tags: IBN Money Special, Credit Cards , New Delhi
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New Delhi: With a high percentage of Indians going on a spending spree, more and more Indians are using credit cards today. However, many people do not fully understand the usability of the product, leading to major problems and financial losses at times.
So, what are thumb rules to make the maximum gain out of plastic money? Two experts in this field – Roopam Asthana of SBI Card Services and Bejon Mishra of Consumer Voice – shared some tips on how to make best use of credit cards on the CNN-IBN Money Special programme, Swipe Smart. The interaction was moderated by Fatima Karan.
First, the basics and the right approach.
Why use credit cards at all?
Roopam Asthana: Credit card in reality is a payment mechanism. It is meant for the safety, convenience and ease of transactions for a consumer. There is another aspect of credit card, which is really the credit piece on the credit card. And that is supposed to be used to match the short-term cash flow mismatches, which a customer might actually have.
Should one use credit cards at all?
Bejon Mishra: Credit card is a tool to enhance the purchasing power of the consumer and it facilitates to get the additional value of money.
How many credit cards should a person ideally have?
Roopam Asthana: Ideally, a person should have only one credit card. Because, the way the system operates, there is very little chance of failure as far as the transaction is concerned. So, in my opinion, a person should have only one credit card.
Buying on credits lead to interest-free purchase. What is this interest-free purchase?
Roopam Asthana: This is a very important question you have asked Fatima. This aspect of credit card is very very unique aspect, which is not available on most of the other products, which are available from banks. On a credit card, when you make a purchase and you actually pay a bill in full, for the entire period you borrow the money from the credit card issuer. And you actually do not pay any interest on that borrowing.
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