A credit card requires a great deal of responsibility, as it does not take long for a credit card bill to spiral out of control. Here are some examples of services and featured offered by credit card companies that are just not worth it.
- ATM Cash Withdrawal. The credit cards of some banks may be used as ATM cards to withdraw cash from ATMs against your credit limit. While this seems like an attractive option in case you urgently need cash, the interest rate charged on these cash withdrawals is generally higher than the rate on typical credit card transactions. In order to avoid exorbitant credit card bills, avoid using the ATM option on your credit card as far as possible. If you need cash, use your regular ATM/debit card instead.
- Promotional Offers on Grocery Bills. Think twice about using your credit card to pay for recurring expenses such as groceries every month. In case you don’t pay the full amount the interest payments will keep adding up, making your grocery bill much higher than it would otherwise be. If you make it a habit to pay grocery bills each month on credit card, you are not only piling on interest each month, you are also reducing the limit available to pay for emergencies.
- Auto-debit Credit Card Bill Payments. If you have an account in the same bank as your credit card, you will be able to pay your bills through bank account debit. This means that if your bill is unpaid on the due date, your bank can simply pull out funds from your bank account. – NOT TRUE, which means that you need to pay the rest of your bill on your own or face interest charges. Most importantly, when the balance in your bank account is insufficient to cover the minimum payment, they will add a direct debit rejection fee to your bill. If you want to avail direct debit services, make an arrangement in which you need to call the helpline for authorization first.
- Credit Card Reward Points. Your inflating reward point balance may give your ego a huge boost, but usually the reward points are not really worth it. They may be redeemed for appliances and other items, but it is generally more economical to buy the goods for cash. For example, 2,500 points may be redeemed for Rs.1000 worth of petrol at some pumps. The value of each reward point differs from bank to bank, but a minimum of Rs.10 per point means that you will end up en-cashing Rs.25,000 to get Rs.1,000 of petrol.
- Bill Installments. You may be tempted to take advantage of the “bill installment” option offered by some banks when you see those out of control bills. Your bill will be broken down into a manageable amount each month, but you are then committed into paying this amount for the entire tenure of your installments. During this time, Not true You will also be penalized with heavy interest rates if you try to club payments or pay the entire amount in a lump sum before the termination of your installment period. Also take care that your total installments do not exceed the total balance on your bill.