Bengaluru-based software engineer Aheli Paul, 24, got her first credit card as soon as she started her career.
“I started my professional career in 2016. After paying my rent, food bills and other household expenses, I had very little money left for other expenses such as shopping and eating out. So I thought a credit card may come in handy.”
Her bank delivered the card to her office almost immediately. Paul restricted her credit card limit to ₹56,000 and used 10% of that on an average. “Some months when air travel was involved, the expenditure was on the higher side. There were approximately three times I could not pay my bills on time and ended up paying a late payment fee of Rs. 2,000-Rs. 3,000,” said Paul. To avoid such situations of extra expenditure, Paul started saving Rs. 2,000 every month to build an emergency fund.
If you are not prudent with your credit card bill repayment, you will end up losing a lot of money. To begin with, credit cards come with multiple charges attached to it. It starts with a joining fee which you have to pay while getting the credit card. Depending on the type of credit card, this one-time fee can range from Rs.199 to Rs. 25,000.
You also have to pay an annual fee. Some banks waive off annual fee for the first year and charge from the second year onward. This can range from Rs. 99 to Rs. 10,000, depending on the bank and type of card. Most banks waive off annual fee completely if you spend a certain amount on your credit card, which is known as annual fee reversal. The most expensive charge is the interest rate the credit card issuing company levies in case you don’t repay on time.
The interest rate can range from 22% to 48% per annum. In case you fail to pay on time, besides a high interest rate, you also have to pay a late payment fee which depends on the total amount due and can range from Rs. 100 to Rs. 750. In case you want to redeem your reward points that get accumulated on spendings, you may have to pay a handling charge which can range from Rs. 75 to Rs. 150. Hence, be extremely cautious which while swiping your credit card and never default on your payment.