Tips to lower your EMIs in case of cash crunch

Job layoff, medical crisis or any unforeseen emergency tends to scuttle our budget. In this case, it can play havoc with our monthly installments of our loans. This can be particularly disastrous if the loan is home loan, as it can lead to loss of your home. So if you are in this situation, or credit card debt, which can easily spiral out of control; here are some tips to beat the cash crunch.

  • Sell off some of your assets.
  • Pay part amount of the total EMI to lower the interest due.
  • In case of a credit card debt, convert it into a personal loan due to its lower rate of interest.
  • Avail of loans against assets like FDs, gold and shares and property.
  • But if all these fail, the last option is to seek help from the debt counseling centers or approach the bank directly. Most banks are willing to help out customers in distress to recover at least a portion of their dues.

Tips to shop online securely

Today online shopping has grown by leaps and bounds, due to higher penetration of Internet. This has allowed people living in any parts of the world buy items from any other part. However this has necessitated the heavy use of credit cards, thus giving rise to frauds and scams.

So if you are scared of using your credit card online but want to shop online, here are some tips to do your online shopping safely.

  • Always buy from secure sites. These are the sites whose web address ends with https instead of http. Also ensure there is a padlock symbol at the bottom of the browser. This means this site is very secure and you can go ahead and shop online.
  • Avoid posting your private details like our bank account number, credit card number etc. on public sites.
  • Read the privacy policy of the site. If you are uncomfortable with policy, it is advisable to shop elsewhere.
  • Keep your browser, antivirus and firewall regularly updated. This will prevent worms, viruses and hackers getting access to your personal data, thus compromising your security.
  • Use secure payment methods like Paypal and credit card as they offer higher protection than debit cards and bank transfers.
  • Read your credit card statement carefully. If you note any discrepancy in the bill, bring it to your bank’s notice immediately.
  • Avoid shopping in insecure places like cybercafés and any other public computers. Your data is far more likely to be compromised if you do so.

 

These are some simple tips that can help you  shop online safely.

How to select the right credit card?

Today Indian market is flooded with a wide array of credit cards. There are plain vanilla cards, premium cards, co-branded cards and charge cards like Diners International and American Express cards. All this is enough to make your head spin. So how do you select the right credit card?

First determine if you shop at a particular store or use services of a particular service provider regularly. E.g. if you shop regularly at Westside, you can choose HSBC Westside co-branded credit card. This will help you get discounts and special offers when you shop at the store or use service provider’s services, thus saving you money.

Are you looking to earn money on your shopping? Then go for cash back cards. Here you get a certain percentage of the amount spent as cash back.

Are you a frequent traveler? If yes, then opt for cards that reward you for every rupee spend on your tickets. It will help you get rewarded for making business trips.

Similarly if you drive a car, take a card that will help you save money or get rewarded every time you fill your car at the petrol pumps.

Some cards offer you the facility to convert your purchases into EMIs without paying any interest. This is useful if you shop a lot on your card. Others offer you discounts for eating at certain restaurants, shopping at certain stores etc.

Take these factors into account when you apply for the credit card.

Tips to better your credit score

Whether you are looking for a credit card or any type of loan, having a good credit score has become mandatory. You can get your credit score from CIBIL But what do you do if your credit score is poor? How do you improve it so that you can get credit easily?

  • Ask for you credit report annually. Go through it carefully. If you notice any discrepancies, get them rectified immediately by contacting the bank. Point out the discrepancy to the bank and ask them to notify the discrepancy to the CIBIL. However if the bank does not help you out, get in touch with banking ombudsman and CIBIL. Show them the proof that you have cleared your outstanding dues.
  • Pay your bills on time. Whether it is your credit card bill. Loan EMI or electricity and telephone bill, ensure you pay it on or before the due date. Use automatic payment facility like Bill Pay which will automatically debit the amount from your bank a couple of days before the due date. This is a sure shot way to enhance your credit score.
  • Make sensible use of credit cards. A credit card is a useful tool to help you enhance your credit score. Pay your bills in full by your due date. Don’t use the card up to the maximum credit limit. This shows that you can handle credit sensibly.
  • Keep your debts low. Even if you manage to pay all your debts on time, having debts far below your income will show you are responsible in managing your money.

 

Follow these tips and see your credit score improve.

Different types of credit card charges

Credit card can be an expensive credit tool if not used properly. This is because it has many charges that can easily bog you down in financial crisis and destroy your credit rating. Here are some of the most important charges that accompany credit card.

• Late payment fee: When you get your credit card bill, you are given a due date by which you have to pay the outstanding amount. If you fail to pay the amount by this date, you end up paying late payment fee.
• Finance charges: When you use your credit card for making the payment, you are in effect taking an overdraft, which is a type of loan from the bank. You get an interest-free period during which you can pay off this amount. If you don’t pay the full amount by this date, the unpaid amount along with new purchases attracts finance charges. This rate can be as high as 45%, thereby leading you to debt trap.
• Cheque bouncing charge: If your payment cheque bounces, you end up paying this charge along with late payment fee.
• Cash withdrawal charges: Every credit card allows you to withdraw cash from ATMs in case of emergency. But remember, unlike the cash withdrawal using debit card, the cash withdrawal using credit card attracts cash withdrawal charges. So it is advisable to use credit card for cash withdrawal sparingly.
• Annual charges: While most entry-level cards don’t have any annual fees, the hi-end cards charge annual fees. These fees can be very high. So you need to watch out for these fees before deciding to take one.

Tips to use your credit card safely online

Today Internet has quickly become a popular shopping destination, due to low overheads involved in the transactions. You also benefit by being able to shop at any online store located in any part of the world. However the major drawback of online shopping is that you need to pay for your shopping by using your credit card. This is a major danger as your card is susceptible to be misused. However with these useful tips, you can protect yourself against falling victim to credit card scams.

• Always shop at secure sites. You can detect these sites by looking out for a lock symbol at the lower left hand side of your browser and using https instead of http as its address. These sites are considered to be very secure so your data is transferred securely.
• Keep your antivirus software updated. This is the most important yet often overlooked aspect of security. Keeping your antivirus and firewall updated will prevent your computer from being accessible to online hackers. This will protect your credit card from being compromised.
• Buy online from well-known sites. Don’t go shopping at unknown or dubious sites. Rather stick to bigger sites like rediff, ebay, amazon etc. even though the items available here may be slightly expensive.
• Find out if the site accepts paypal. Paypal is an online electronic payment system. Here you can fund your account with the money from your bank account or credit card. When you pay with paypal, the purchase amount is debited from your paypal account. The main advantage of paypal is that you can ask for refund from the vendor, and you are sure to get it, no questions asked.
• Don’t shop from public computer. When you do so, you are not in charge of the computer, which may be infected with viruses and keyloggers. These programs can send your card details to hackers, who can misuse it, thus leading to credit card fraud.

Credit Card vs Personal Loan — Which one to choose?

You are in urgent need of cash. On one hand you have the option of withdrawing cash by using your credit card or opting for a personal loan. How do you choose the best  option? Which is the right choice for you?

The best part of taking cash against your credit card is that you don’t need any approval from the bank. You can get the cash whenever you want. All you need to do is go to your closest ATM and withdraw the cash. Also you can pay off the loan whenever you want. There are no prepayment penalties if you choose to pay the loan any time you so desire. But the major drawback of taking loan against credit card is exorbitant charges, levied by the bank. You not only have to pay cash withdrawal fees but also the interest on the amount withdrawn. This can make this loan very expensive.

On the other hand, personal loan needs your bank’s approval. You should have a good credit record to avail of this loan. Also if you are looking for immediate cash, this loan is not for you, as banks need some time to process your application. There is a processing fee, which is most cases is not refundable. So you end up losing money, in case your application is rejected. With the stiff competition amongst banks, you can look around for favourable loan terms. You may also have to pay prepayment penalty, if you decide to pay off the loan before its term is over. The advantage of loan is its comparatively low rate of interest.

Both credit card and personal loan do have their pros and cons. Which one you should go for? Well, it will depend on your circumstances. If you are need of immediate loan for very short period, then credit card is right for you. Otherwise personal loan is good for you, provided you have good credit record.

Your credit card statement demystified

You use your credit card to pay for your purchases, pay the bills and various other purposes. Your card issuer then sends you the card statement for the transactions that have taken place in your account. Do you know how to read it? What do all the terms in the statement stand for? Here we explain the most important terms in simple terms.

  • Payment due date: Payment due date is the last date by which the card issuer expects to receive your payment. If you pay after this date, you are charged penalty.
  • Minimum amount due: This is the smallest amount you must pay. However it is advisable to pay more than this amount in order to avoid paying interest on the outstanding amount. Normally the rate charged on the unpaid balance is very high. You can very easily fall in debt, if you continue to pay only the minimum amount due.
  • Total amount due: This is the actual amount you are expected to pay. It includes any previous outstanding amount, transactions that have taken place in your account and any payments you have made.
  • Total amount due = Outstanding amount + New Transactions – Payments/Credits
  • Finance charges: If you have paid your previous bill late or have paid only the minimum amount due or your cheque has been returned, then your card issuer will charge penalty for you. These penalties are listed under finance charges
  • Credit limit: This is the highest spending limit available for you to spend.
  • Cash limit: This is the highest limit available for you to withdraw cash by using your credit card. However you must remember that you will be charged for this withdrawal unlike the withdrawal done by using a debit card.

These are the most common terms that you will see on your card statement. If your card offers reward points, then you can see the reward point summary at the bottom of the statement. Similarly, if the bank wants to send any important messages to its customers, it may be printed at the bottom of the statement. So it is very important you read your card statement very thoroughly.

How credit card works?

Credit cards have seen widespread use, due to the convenience they offer. No need to carry cash, buy now pay later, facility to avail EMI facility etc. have made this mode of payment very popular amongst shoppers. But do you know it works? What happens from the time you hand over your card at the cash counter to make the payment to when you actually get your card bill?

Credit CardsWhen the cashier swipes your card in the store’s point-of-sale (POS) system, your transaction details are immediately transferred to the merchant’s bank through the communication link. Here your details like card limit, availability of adequate balance and card expiry date are captured and transmitted to your card issuing bank. These details are present in the magnetic strip, found at the back of the card.

Your bank will check all the details and authorize the transaction, if everything is in order and generate an approval code. The authorization is sent to the merchant’s bank, which blocks the purchase amount from your credit limit, so as to pay the merchant later on. The approval code is transferred to the merchant and is fed in by the cashier. It generates two copies of charge slip, which is actually an agreement that makes you responsible for paying your bank.

You sign one copy and hand it over to the cashier and keep the other copy with you. The merchant collects all the other charge slips, prepares batches from them and deposits them in his bank account. His bank sends these batches for clearing and settlement to the credit card association. This purchase amount is charged to your bank, which in turn charges the amount to your card account. 

Though you may think credit card transaction is simple, in reality it is not. There are many steps involved in processing the transaction. You need to be aware of these steps in order to understand how credit card actually works.

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