The Mirage of Credit: Things you should know before getting a Credit Card

Credit Card has become an integral part of our life. From paying an electricity bill to grocery shopping, we are using it on different purposes. With the increasing number of working individuals, the number of credit card holders are also growing rapidly. Moreover, Banks have introduced many promotional activities to tap the additional customer base. They have used push and pull strategies to acquire new customers. The Banking professionals or Salesmen, to meet their targets or for incentives, are giving the cards to anyone, in respect to their income or ability to pay. I saw some instances where students are being issued credit cards by the banks based on the assumption that they will get a job after the college and pay back the money due to credit card companies.

Credit card is like a sweet poison. Initially, you will find it very beneficial or wise to use but when you’ll realize you have ended up overspending it and paying a lot of interest & charges to the bank. These Unnecessary charges could have been avoided, if you had not had a credit card. And the trap is so unavoidable, that you cannot just get out of it without cursing yourself a zillion time (why the heck I got a credit card).

I happen to have a premium credit card from a very reputed private sector bank. Let me tell you what they (bank employees or salesmen) told me while issuing the card:

• Interest @3.5%
• Free Airport Lounge Access
• Promotional coupons for Retail outlets
• Reward points

These benefits seemed like anything, because, this was my first credit card. I thought these benefits will be there for me as they have mentioned, but, I forgot there was a little star mark at the end of it which is commonly referred as T&C (Terms and conditions).

• Interest: To my surprise the 3.5% was monthly interest rate which is like close to 42% annual. It simply means, in two years, your Debt will be double, if you haven’t paid your credit card bill.
• Free Airport Lounge Access: There is some number of free international and domestic Airport lounge access. But, When I was about to avail that my card got declined and come to know that it’s an entry level premium card, so the facilities are not available on this card.
• Promotional Coupons for retail outlets: The coupons were also of no use because they gave me discount on those items which are either off-season items or outdated items. They gave me discount on spectacles, although I don’t have any eye problem. ??
• Reward points: This was beneficial. The reward points got accumulated and I had close to 10,000 reward points. I was very happy, at least some benefits for using a credit card. But, there was again a twist. These points can be utilised only to the online store maintained by the bank and the store has again outdated items which nobody has a use, or nobody was willing to purchase. Can you imagine, they were selling 2 GB Pen Drives in their store.

These are the services, I have been offered. Let me come to the Bank charges they levied:

• Finance Charges: 3.5% per month on your due amount
• Late fee: Rs. 750 (in respect of any due amount)
• Over limit fee: Rs. 500 (in respect of any due amount)
• GST: 18% on both late fee and over limit fee
• Withdraw charges: Rs. 500 on any ATM withdraw (in respect of any amount)

The above were the monetary charges that I have paid. Apart from that, there are some other problems also:

• If you are thinking that you can convert your due amount to an EMI, you are wrong. This facility is only available to some privileged customers.
• The tone and style of customer care’s voice will also change. There is a huge difference when they try to sell the credit card vs when you are late for payments. They can disturb you while you are in meeting, sleeping or doing anything. In my case, I asked her I am in meeting and I will not be available for 3 hours, she kept on calling me every 30 mins interval. Believe me, it was frustrating.
• If you miss one payment, it will cost you many CIBIL points, which eventually lower your chances to get an economical loan in future. Even after paying the due amount with fine, you cannot compensate your CIBIL score.

At last, I would say one thing that although the credit card has several benefits like It gives you anytime credit which is used in the adverse circumstances or case of emergency, but It also has certain drawbacks if you do not use it wisely.

There are people who using it wisely and utilizing its maximum potential, but, I would urge you to read the above-mentioned points before getting a credit card, so that you know what problem you are going to face.

P.S. From this article, I am not advising anyone to stop using credit cards, but I am telling the problems they will face if they will not use this product wisely. I am open to your views and suggestions. Feel free to reach out to me at [email protected].