Most people dream that the Interest on Card Outstandings is 3% on an ANNUAL BASIS. This is actually 3% on a MONTHLY basis. The Card Outstandings are charged on a COMPOUNDING Basis, and thus this works out to over 40% on an Annual Basis. ADD to this the already large Service tax Charges on the Interest: 10.2%. And with the Service Tax added, the ANNUAL Interest Chargeworks to over 44%.
Compare that with JUST 3.5% which most Banks offer You on your Savings Bank.
And in today's Cut-throat Business, few Industries / Businesses can dream of an Earning like 44%.
All Card Companies use this as a great marketing gimmick: You are required to pay only 5% of your monthly outstandings. Great!!
Earlier they required you to pay 10%.
People who only pay ONLY 5% regularly, roughly pay 3% Interest, and the Balance 2% ONLY towards their Outstandings. Thus you only pay Rs. 2 against an outstanding of Rs. 100. Thus you build up your Outstanding for a period of the next 49 months (IF there are no further Spendings on this Card). The only people happy are the Card Companies who enjoy the Gigantic Interest that you pay.
These are the real hard core facts one has to look at. Above explanation is true in many cases. So be carefull in taking Credit Card. And Know each and every extra charges lavid on purchase using Credit Card.
If you really need Credit Card, then only take it. Otherwise don't take unnecessary cards. Don't take having Credit Card as Status issue. Its really a overbourden, if you are not in a real need of it.
one major thing left in this article is if somebody has misused your card in online transaction, then it is the cardholders responsiblity and not the bankers responsiblity.
Interest on the dues will not be shown in the credit card statement as Interest on outstanding/dues, instead it will be named as service charges. Most users doesnt understand what this charge means and unknowingly they fall a prey.
RE:Credit card - hidden devil
by baidp on Nov 12, 2005 11:32 PM
yaar sabse achha hai ki debit card use karo.... transactions are good.... exchange rate is superb.... no addl fees its better
RE:Credit card - hidden devil
by Thanu pillai on Nov 09, 2005 10:24 PM
cautious use otherwise debt trap, if one bank given other bank give higher limit ,from silver to gold, so possibly avoid go for debit card instead credit
3.5 % Transaction fees is levied if you use the Card for International Transactions... If you travel and use the card... pay 3.5 % extra !! If you buy something from the net in dollars/pounds, pay 3.5% extra !! This is above the killing exchange rate that they use... I dont understand how do they always manage to arrive at a rate that is atleast a rupee higher than the quoted one.
Moreover, they would not show the 3.5 % as separate fees, it comes INCLUDED in the transaction cost. Suppose you buy for 100 $, you pay extra 3.5 $ and the statement shows directly 103 $ converted to indian rupees !!
Some of the credit card companies have another customer unfriendly modus operandi - which is as follows: a. you are allowed to pay a minimum of 5% of your total bill and the rest is rotated for payment later. this is done by all the card companies. b. some of the card companies go even further - they not only charge the interest rate on the balance amount due for a particular month, but charge the interest rate on additional use of the card in subsequent months. for e.g. in august if you have utilised the card for Rs. 5000.00 and pay the minimum 5% = 250.00, the card co. charges you a 2.5% charge on the balance 4750.00. In september if you have used the card for another Rs. 2500.00, you are charged the interest of 2.5% not only for the Rs 4750.00 but also the Rs. 2500.00. in effect you end up paying interest charges of Rs. 181.25 instead of 118.75 this is being done by a few mnc banks only.