Credit Cards: Make them work for you

Hi Everybody,

First, I would like to thank Mohamad Al Karbi for inviting me to write a guest post on his blog. It’s my first guest post and I feel truly honored.

To be honest, I wasn’t too keen on accepting the invite because I had been asked to write on banking. All who know me, will not be surprised at the hesitation I felt. Blogging for me, has been an outlet from the mundane world of banking and I have enjoyed every moment of it since I started last September. It is what I do with my heart and Banking is what I do, with my brain.  But as all roads must intersect at some point in time, so I guess, this is point of intersection between what I love doing and what I have to do . Having worked for eighteen years in credit cards, I can say I do understand the workings of a credit card and the ordinary issues a layman faces when dealing with cards. So Mohamad was definitely right in approaching me to do this. In today’s post, I aim to explain benefits that you should be looking for,  when picking a card for you and mistakes people generally make when using the plastic.

These days everybody has a card. Some understand it, some don’t. Some think of it as a necessary evil, some know it to be a blessing.

Through this post, I’d like to help all those people who think of it as an evil because while the phrase “ignorance is bliss” works in most cases, believe me, it does not in the world of credit cards. Know it’s a tool in your hands to make your life easier and understand it so that you are in complete control of it. Use it wisely and reap the benefits.

In many countries like the United States, it’s probably next to impossible to live on cash. Everything requires the use of the plastic, from paying the cab bill to booking a hotel, paying for groceries, school fees etc. However, in some countries like the Middle East and India, amongst others, cash is still an accepted norm of payment and there are still a number of people who vouch for the credit card “trap”. This post is for all such people.

Don’t be scared of taking a credit card

The product has been blamed unnecessarily over years with many in the developing countries still believing it to be a trap that encourages unnecessary expenditure and lands a person in debt. That’s simply as true as saying a knife is a weapon and must not be used at all for cutting or saying petrol can burn so must not be used in vehicles. Credit cards avoid the need to carry loads of cash when you’re travelling and reduce the chances of losing substantial sums of money due to theft. If your credit card does get stolen like mine once did, call up your bank immediately without any delay and ask for the card to be blocked. Any charges on the card after you have informed the bank to block the card becomes the bank’s liability and not yours. You simply need to stay alert with your plastic as you would do with your cash.

Study the benefits provided by various credit cards in your region/market

Due to the intense competition in the credit card market, most banks these days, do not charge annual fees on the credit cards they offer. Compare the benefits provided by credit cards offered by various banks in your region along-with the tariffs and pick the one that provides you the maximum benefits at the lowest cost (monthly interest rate). Ask your bank all the questions and understand what they are saying. If you don’t ask again. After all it’s your money at the end of the day.

• Check out cards with no annual fees
• Check out the ones which offer the lowest interest rates.
• Check out the benefits provided on the cards by the various banks:
  • Points against purchases made which can been redeemed. Some banks offer a cashback after you get a certain number of points while others allow you to avail vouchers that can be used to buy items at any of the participating outlets.
  • Easy Payment Plans– Most cards these days allow you to pay for your purchases worth over a certain amount at a zero% interest for a period of time, after which the rate of interest charged is lower than the normal monthly interest rate. You can use this facility to pay your children’s school fees, buy tickets or any other high value item without putting too much pressure on yourself.
  • Balance Transfer – This facility allows you to pay off the outstanding balance on another card by transferring the balance to the new card. So if you are not happy with your current credit card because of the service or because of the hidden financial costs, simply choose the credit card that’s best for you and ask the bank to pay off the outstanding balance on the credit card that you aren’t too satisfied with, while debiting the new card. You do not have to be stuck with a card or a bank that’s not working for you.
  • Discounts– A number of banks also provide discounts on movie tickets, restaurants etc. Check these out and choose the card which suits your interest. If you’re a movie buff, then you would go for a card which gives you discounts on movie tickets. If you’re a frequent traveler, you may want a card which provides you with air miles and lounge access.

• Make your card work for you-

• Payment Plan -There’s absolutely no hassle if you agree for a 100% payment plan. On the due date, pay up the amount due on the statement and avoid paying any interest.
• Cash on card– If you are in urgent need of cash, then credit cards are the best way to get the necessary cash with absolutely no additional documentation or delay that would be involved if you were to opt for a loan. However, be aware that there are fees on cash advances which get charged from the day you take cash on your card even if you have a 100% payment plan.
• Interest free purchases– Most banks lure customers stating that they get 52 days interest free period. Most customers have absolutely no clue how this works and it’s only the first statement and after they are hit with interest charges, that they become cautious or decide never to use the card again. You get the 52 days period only if you make your purchases on the first day after the statement date. So if your statement date is on the 12th of the month, you make your purchase on the 13th of the month, then you have 30 days until the next statement is generated which would have the details of this purchase done and another 22 days to make the payment (depending on the payment due date set by your bank).
• Redeem your points before they expire: Collect points automatically on every purchase you make and redeem those points when you reach the minimum redemption limit. Check your statement regularly to avoid points getting expired.
• Check your statement: In case you have any charges you do not understand, inform your bank immediately. It’s your card and you should be aware of any debits appearing on your statement.
• Pay by the due date : To prevent interest, late payment charges being debited to you.
• Stay within the limit: Know the limit allotted to you on your card. Some banks allow a tolerance limit over and above the limit allotted to you. Be careful to stay within your limit. Do not cross the limit, even if a tolerance limit is provided because the moment you cross the limit, you will get charged over-limit fees. So if you have a limit of $100.00 and the bank allows a tolerance limit of 10%, you can use up-to $110 without the transaction getting declined. However, the moment you use $100.10, you will get charged over-limit fees.
• Cancelling the card: If you request the bank cancel your card, ensure you collect the clearance certificate from the bank. This ensures complete closure and protects you from any unauthorized debits in future.

• Use your card only on secured websites : With online shopping becoming the rage these days due to various reasons, it’s important to be aware of fake web-sites. The card number should be provided only on websites that have the “Verified by Visa” or “Master Card Secure Code” mark. This ensure the website is genuine.
• Raise a dispute immediately : Don’t be scared to raise a dispute. If you have a transaction that you do not understand on your statement or if you get a sms informing you of a transaction that you have not done, call up your bank immediately and inform the bank or block the card and raise a dispute online. If on receiving the documents from the merchant, you do accept the transaction, then you can always ask the bank to unblock your card. Sometimes, merchant names on the statement may be different from shop names creating confusion or sometimes you may have delayed charges from hotels and rent a car companies which you may agree to on receiving the documentation. If you still feel the need to dispute the transaction, you can inform the bank.
• Keep your PIN/TIN/Online Passwords safe: Do not write down the passwords and keep it in your wallet with your cards. That’s like providing the locker with the key to the fraudster. Most banks are moving to biometrics which would avoid the need for all these passwords. But if your bank is behind the rest, then you need to keep your passwords safe.

The above are just a few basic points on using a credit card. Many of you who have been using it, have probably mastered the art of managing credit cards and are hopefully enjoying all the benefits provided by the banks. .

For those others, who have yet to master the art ( and I know there are many such looking at the number of customers who get into the debt trap), I hope you found the above post useful. Though the individual features on credit cards may vary from bank to bank, region to region, the rules governing them are set by the Associations (Visa/Master Card) which are common to all banks irrespective of the country, so if you have any further questions, feel free to ask me. I will answer them to the best of my ability. Until then, enjoy the plastic and make it work for you :).

Cheers,

Smitha V

P.S: I don’t write about banking on my blogs. I write poems and posts based on experiences that have touched my heart. Do visit my blog and check out my posts at:

https://lifeateacher.wordpress.com/

Copyright , 2017. lifeateacher.wordpress.com. All Rights Reserved.