Jackie’s Journaling: Day 77 – Key Concepts pertaining to Credit Cards

his article is to be read in conjunction with my Journaling on Day 56 titled Understanding Credit Cards. May I urge you to read it first, and then continue with this piece of writing. The context and background laid out by the previous article will set the foundation to completely appreciate this piece of writing.

As a quick jog of memory, in Day 56 we covered the basic concepts in Credit Cards, including

1.??????What is a Credit Card,

2.??????How do Credit Card companies make money,

3.??????How to choose a Credit Card, and

4.??????What are some key things to remember as a user of Credit Cards

In today’s dispatch, we will double down on point 4 and spell out some key details to keep in mind as a user of Credit Cards. My objective is to ensure that you know everything that is needed to make informed decisions on which card to use and how to best use a card. Read on further, this promises to be fun!

(A)???Know your Billing Cycle. Usually, card companies create a 30-day cycle for you. They are not always from the 1st to 30th of a month, instead they can start on any date of a month and continue for 30 days. Knowing your billing cycle helps you ensure that purchases are smartly timed, i.e., the earlier in the cycle you make a purchase, the longer the time period available to make the payment.

(B)???Know your Payment Due Date (PDD). The PDD is usually 12 to 15 days after the Cycle end date. In other words, if your cycle end date is 10th of the month, usually the Payment due date will be anytime between 22nd to 25th of the month. In other words, if you have made a purchase on the 12th of December, the cycle end date will be 10th January, and Payment due date will be 25th January. In this scenario, in effect, you have 43 days between date of purchase and date of repayment. This is very powerful because smart money management will allow your money to earn interest in your Savings Account for 43 days.

(C)???Understand the concept of RDD (Real Due Date): The RDD is usually PDD + 2 days. Financers usually give a 2-to-3-day grace period to factor in for technical errors that may occur while making payments. In case you have missed making your payment by the PDD, worry not you still have 2 more days before you move into category of “Missing the payment”. Credit Bureau reporting happens only after you’ve missed the RDD.

(D)??Learn how Interest Charges are calculated: As a consumer, the total amount that you have transacted on a Credit Card is referred to as Total Outstanding or Total Amount Due (TAD) for the period. A certain percentage of Total Outstanding (TAD) – usually in the ballpark of 20% - is considered as Minimum Amount Due (MAD). As a consumer there are 3 scenarios possible w.r.t to your repayment?

It is Best to repay TAD (Total Amount Due), if short on funds at least repay MAD (Minimum Amount Due). Never fall into Scenario 3, avoid falling into Scenario 2 unless under serious duress.??

(E)???Keep a lookout for Offers: You can most from Credit Cards when you are able to avail of the offers available. Keeping a lookout for them can help ensure that your purchases are well timed. A word of caution though, offers are such designed that they make you purchase wants instead of needs. Offers work best when consumers can time the purchase of their need. In case consumers are made to believe that their wants have become their needs, you know that you’ve fallen prey lifestyle inflation.

(F)???Keep a lookout for Reward Point Redemptions: While the previous point referred to Offers (i.e., discounts, flash sales, etc.), there is also a universe of Reward Point redemptions on Credit Cards. Identifying the genre that best works for you, and periodically redeeming the offers ensure that you make most out of the product offering.

So that was it, 6 basic points that can make you an informed and mindful user of Credit Cards. Do write back to share what you felt about this. In case you want anything specific to be covered pertaining to Credit Cards, do indicate. I will be happy to write about it.?