Credit card is a convenient system of payment. The credit card holder can use the card to buy goods or services and pay the credit card company later. Credit cards have become very popular, with millions of people using them all over the world. There are many credit cards in the market.
In the current economic scenario, more and more people are falling into what one can call “Credit card trap”. Their inability to pay their huge credit card bills is affecting their credit scores. Credit card users should get a clear understanding of how the system works in order to avoid credit card traps. Who ever is planning to go for a credit card should go through the credit card application in order to understand interest rates, fees and other charges. They should be cautions when they see terms like “as low as”, “up to”, etc in the application.
Here is a brief description of some of the common credit card traps:
-Credit card companies allow the card holders to pay minimum amount every month. But they charge exorbitant interest rates – which can go up to 25 per cent – for unpaid debt. This is a very dangerous credit card trap. It is always a good idea to pay the balance in full each month.
-Some credit card companies charge a non usage fee if the card is not used for a specified period of time. It is a good idea to go through the terms and conditions before getting a credit card. It will help the card holder to avoid these fees.
-In an endeavor to get new customers credit card salespeople promise that there would be no annual fees. But the same may be added after some time. This should be clarified before signing the application.
-Credit card companies charge missed payment penalty. It is better to understand how is is calculated.
-Credit card holders can withdraw cash from ATM. This is a very dangerous credit card trap because interest free period generally do not apply for cash advances. Interest rates are very high.
-Some credit card companies charge a fee for purchases made overseas. These should be clarified before signing the credit card application.
-Many credit card companies offer various privilege programs to customers which make them eligible for free gifts and discounts. But some of them charge a membership fee for these. The terms and conditions should be discussed before subscribing for these programs.
-Credit card companies appear generous by allowing the credit card holder to exceed credit limit. But they charge huge fee for exceeding credit limit.
Credit cards can be really useful during emergencies. But the card holder should be aware of the above mentioned credit card traps.