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Personal finance: How to use a credit card

Personal finance: How to use a credit card

According to data provided by the Reserve Bank of India, as of December 2020, there are 60.4 million credit cardholders in the country. The credit card debt in the same month was ₹63.84 lakh – arrived at by assessing the value of transactions at ATMs and point of sales (POS). The total number of credit card transactions in December 2020 alone equalled 174.7 million. Many of us rely on credit cards to pay off bills or withdraw money, but are we aware of the fine print? Here’s what you need to know when you use credit cards.

Credit rating matters

Your credit score depends on the regularity of your financial activity and how promptly you pay off your bills. Timely repayment of credit card debt will help build up your credit score that would augment the chances of getting loans approved. You miss a repayment cycle, and the result is debt piling up on your card. This gets recorded in your credit file, thus, impacting your credit score in the negative.

Higher interest rates

Many credit card companies offer bonuses for signing up for credit cards. The customers avail bonus points on having spent a certain amount within a certain period. These bonus points can provide discounts on other purchases. Cashback offers during seasonal bonanza sales also help you avail of discounts on paying with credit cards; sometimes you may even get a small amount of money back on paying with credit cards. Credit card companies make it seem attractive to use credit card to spend. But it’s equally important to remember that the money should be repaid else it will invite interest charges as high as 10% every day.

News Source: HindustanTimes

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