The ability to make big-ticket purchases without delay, the convenience of going cashless and the many rewards awarded on every transaction may have convinced you to get your first credit card. What’s more, a credit card can also give you much-needed financial relief during trying times by offering emergency loans. While these benefits certainly boost your finances, there are certain credit card rules that you should keep in mind before availing one. Doing this will help you use your credit card diligently and further safeguard your credit score.
Here are 5 important credit card usage rules you should abide by :
Credit card rules and regulations
To uphold consumer interest, the RBI mandates every issuer to abide by the general credit card rules and regulations that it lays out from time to time. These guidelines relate to certain aspects like declaring interest rates and other fees upfront, with any violation attracting penalties.
Nevertheless, the issuers enjoy discretion when determining the interest rates and other charges on their credit cards. These charges include processing fees, joining fees, annual fees, transaction fees and ATM withdrawal charges, among others. Therefore, as a consumer, discussing these charges with the issuers before signing up for a credit card will help you make informed decisions.
Credit card payment rules
You are aware that every issuer summarises your credit card activities for a particular billing cycle, usually a month, and bills you on the billing date. Further, you get a 30 to 45-day window to clear your credit card bill during which the issuer doesn’t charge any interest. However, once you pass the due date, you will have to pay a high interest, which ranges from 36% to 48% annually, on the outstanding dues. So, it’s important to repay your dues on time to avoid incurring late penalties. If you don’t do so, your outstanding dues will be carried forward to the next billing period, which again attracts interest. This can eventually lead to spiralling debt. So, one of the most important best credit card rules is to spend with care and pay on time.
Credit card minimum payment rules
To ease repayment, the issuer gives you an option to pay a minimum amount to avoid penal interest. Though this seems tempting, avoiding this option is the best for your financial wellbeing because after you make the minimum payment, your balance amount still attracts high interest. Though this may not seem to be a problem at first, if you continue making the minimum payment for multiple billing cycles, then, in the end, you will accumulate a fat credit card bill which can land you in a debt trap. To avoid this, pay your credit card bill in full on time.
When issuing your credit card, the issuer allows you a credit limit based on your credit profile, income and past repayment behaviour. This credit limit is the maximum you can utilise using your credit card in a particular billing cycle. With time, your credit card limit is subject to change due to an increase in your income or an improvement in your credit score. While the issuer offers a credit limit based on their understanding of your repayment capacity, you should strive to maintain a low credit utilisation ratio and only use the credit you can afford to repay. Otherwise, you will incur high-interest charges, which strains your finances and can harm your credit score.
Credit card cash advance and withdrawal rules
Just like a debit card, you can also use your credit card to withdraw cash from an ATM. However, the issuer may charge a processing fee and interest on the amount you withdraw, which can sometimes be heavy on the pocket. Some issuers also allow you to avail a loan on your credit card during an emergency. This attracts interest and adds to your liabilities. While it is best to limit your cash withdrawals and emergency loans on a credit card, exigencies come unwarranted and leave you with no choice. Fortunately, with the Bajaj Finserv RBL Bank SuperCard, you can enjoy a 50-day interest-free ATM cash withdrawal and avail an emergency personal loan against your cash limit at a nominal interest rate of 1.16%, for 90 days. This allows you to meet your emergency needs without harming your finances!
Now that you have a fair idea about the credit card usage rules, you can go ahead and apply for your first card. To get started on the right foot, check your from Bajaj Finserv to view a customised deal and expedite your access to credit. Once you are approved, you can make the most of the discounts, reward points and cashback on the rewarding SuperCard to enjoy savings of up to Rs. 55,000 annually!
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