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Review credit card details

Here are some changes that all plastic money users should be aware of to avoid debt trap, writes Arnav Pandya.

india Updated: Oct 20, 2008 23:01 IST
Arnav Pandya

As the financial situation gets tighter individual users of financial products need to be vigilant about how they use these instruments. For example, in case of credit cards banks would be quick to take severe action incase the card is overused and payments are delayed. Investors can ensure that they are not caught on the wrong foot by taking care of their transactions through their credit cards. Here’s what a credit card user must know:

Interest rate

Most banks manage their interest rate on credit cards within a specific band. However the tightening monetary situation has led to many banks raising the interest rate on the credit card. The charge could have risen marginally but would reflect as a larger figure when the monthly rate is converted to an annual one. If you do not know the rate then it is important to check out the actual figure or you may be in for a rude shock when you get your next bill where there is a large charge on an expense that would have slipped into the interest fold.

Credit limit

Knowing the credit limit helps a cardholder to ensure that they spend within those limits. However, credit limit that might have been reduced or curtailed can come as a shock to an unsuspecting user. Cardholders must take a careful look at their credit card statement, which mentions the credit limit along with the unused limit. If there has been a change then it will be reflected in the statement.

Due date

The due date of the credit card payment is very important because this might be changed by the bank to reduce the amount of credit period that is allowed to the individual. If this is done without the cardholder’s knowledge then there is a chance that the payment might be missed and the person actually enters the interest rate cycle. This has to be avoided and hence the due date has to be monitored carefully so that the payment is made before this date to avert any problems in the payment process.