This is an article based on my experiences using credit cards.
The basic idea of credit card is to make payment procedure easier, faster, and saver. How come ? By using credit cards, people should not carry huge amount of cash, which is placed them into criminal's target. Just sweeping the card and sign the bill, the payment was made.
But, now using credit cards can places the card's holder in a big trouble. Why ? Because they lost control of shopping, and forget that the amount was used should be paid back as soon as possible.
The due date
Every card has a print date and a due date. Print date means the date when bank prints the bill of all transactions was made by a particular card and send the bill to the card's holder. The bill should be paid before the due date. If the card's holder pays all of the total amount printed in the bill, the case is closed. But if the card's holder can't pays the total amount of the bill, he/she can pays only at minimum payment or more. The minimum payment currently is 10% of the total amount of the bill. The rest that hasn't paid yet will be charged by interest.
The interest of credit card is very high, currently is around 3.25% - 4% per month depends on bank's regulation. This interest is being main income of the bank that issues the card. Another incomes for the bank are annual membership fee, late payment penalty fee, cash withdrawal fee, joint venture card payment fee with another banks, and so on.
Cash withdrawal fee is special one. The amount of interest is higher than ordinary (shopping) interest. Currently, the cash withdrawal fee is around 4%-4.5% of the amount of cash withdrawal. If your withdrawal amount is too small, there is a minimum fee applied. Once you withdraw some cash, the day after the withdrawal day will counted as interest. So, there is no grace period for cash withdrawal in credit card usage. You should pay it back as soon as possible. Watch out !!
The Debt Collecting
If the card's holder can't pays the bill, the amount of the bill will be higher and higher. I think the bank has already spare some percentage of non performing loan to cover its business. So, what will bank does if you can't pay the bill ? Bank will hires a debt collecting company to collect the debt from you. As I know, if the debt collecting company can collects some money from you, 50% will belong to them, and 50% will belong to the bank. The debt collector will uses any ways in order to collects the money from you, including psychological pressure to you or even to your family. They have to push you to pay the bill.
How to use credit cards wisely ?
Some people decide to not to own any card at all. But actually we can use credit cards wisely. First, choose credit card from a well known issuer bank. Read some reviews and customer's complain in the newspapers or internet related with credit cards. Second, hold only one or two cards from high reputation banks, no more. Remember, each card will charges you an annual membership fee. Third, use the cards for emergency use or frequently scheduled expenses only. It means you're already budgeting some amount of money to pay the expenses. Paying using credit cards just to complement the way to pay in cash. So you should pay total amount of the bill and this will avoid you from interest. You have to do this consistently.
May be the bank will offers you some discount programs or other promo in order to make you spend more money and increase you credit card usage. But still, you have to control your expenses using credit cards.
The advantages of using credit cards
Based on my experience, using credit cards in order to buy airline's tickets will give you more advantages. Because if you buy a ticket using credit card, you will be covered by some amount of insurance. Another experience is when my family member has to be hospitalized, credit cards would be helpful in that kind of situations.
So, don't be afraid to have a credit card. What you should have just control and discipline of using credit cards. Peace !!
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