Balance transfer is great idea if implemented properly. You can transfer balance to another card, but make sure to put that card into locker. If you use that card to purchase anything, you get into trouble. Let me explain. If you have 50000 in card A which you balance transfer to card B. So your card B holds balance of 50000 interest free for incoming 12 months.
Say you purchase 5000 worth of item on card B, your total balance will be 55000. If you pay 5000 in next statement date, it will minus 5000 from 50,000 and NOT from purchase of 5000.
Your 5000 purchase will keep incurring interest until you get rid of your 50000 balance transfer.
Credit card payment operates in this way: When you pay towards balance of your credit card, that payment is allocated towards least interest items.
So if your card has 6000 Rs cash withdrawal, 5000 of purchase & 50000 of balance transfer; payments will be allocated to balance transfer first, second to withdrawals and then cash withdrawals.
So best option when you do balance transfer is to lock credit card into locker until you get rid of balance.
When I read about heading of this article, I thought I will discover how to avoid some of the disadvantages and learn something new. However it does not.
I used credit cards & debit cards since 1998, both in India and abroad. In my opinion following are disadvantages of Credit cards. I would recommend using debit cards for purchase, they offer same convenience of credit cards at the same time avoid disadvantages.
1. Having credit card mostly results in overspend. 2. Floating period offered is between 10 days to 45 days. That means you may have to pay within 10 days. 3. If you have any balance from previous statement, you have to pay interest on all purchases even if you pay in next immediate statement. 4. Cards charge up to 3% per month interest and it is compounded every month. If someone pays minimum payment of 5% per month, he may end up paying this debt over his life time. 5. Credit & Debit cards incur transaction fees on all purchases. Although this cost is borne by seller, ultimately it adds up into the purchase price and paid by customer. Debit cards have a fix transaction fee per purchase irrespective of transaction value. For credit cards this fee is in % of total transaction value.
I have seen sellers offering different rates based on mode of payment (cash, debit card, credit card).
Only advantages credit card has are following: 1. Its emergency credit. If you have to pay for something urgent (hospital expenses, utility bills etc) and you do not have funds in your bank at that time, it is handy to pay using CC. 2. If you do air travelling, always buy ticket using CreditCard, it will add up 2.5% in total payment, but it will provide protection if your flight is cancelled. You can get your full money back in such cases.
For an average human beings,in my openion credit card is not good ,because by having the card one have intension to spend,this makes man to spend more.I have 2 credit cards and 2 debit card but i think it helps the banks to accumulate the funds,not an ordinary to save.?
RE:Creditcard is not good
by Rothin Bose on Apr 18, 2007 12:02 PM Permalink
Its a spending tool and not savings one. Its for those people who just want to avail credit period of 50 days approx. Follow simple principles, pay the full amount due on the due date, don't go for minimum due amount, and live in peace.
Its in your hand to decide, if you are tempted to go for impulse purchases beyond your repayment capacities then don't blame the Credit Card Companies.
Its a conveniece product for many people but requires judicious usage.
I personally feel one should not use a credit card. Its a trap/temptation. You end-up buying things which are not necessary and a huge bill. If you dont have the money to pay, you pay the minimum charges. For example if you have an outstanding amount of Rs.10,000. Minimum would be 5%. That is 500. The balance is charged interest in your next bill. That will be 9500 x 2.95% = 280.25. So your next bill will be 9780.25. Again if you pay the minimum bill, that is Rs.489.01 your balance will be 9291.23. Again you are charged 2.95% and again you pay the minimum. this goes on and on and on.
RE:Never Ending mess!!!!!!!!
by amul kamdar on Apr 17, 2007 12:34 PM Permalink
intrest is not charged for the full month. intrest is charges on the due amount from the dated of purchase....
RE:Never Ending mess!!!!!!!!
by Rakish Poulose on Apr 16, 2007 09:50 PM Permalink
Use a credit card only if you have control over your expenditure. If you are tempted to buy all that you can, don't use a credit card.
Waht is often overlooked is the humble debit card. Most people use it as an ATM card only. but isntead of withdrawing a huge lumpsum for hosuehold expenses every month, people can save by using the debit card wherever possible instead. not only does one get to spread the expenses over a period of time but also earn higher bank interest - as savings bank account interest is calculated on avg. daily balance
RE:even debit cards are as useful
by Rakish Poulose on Apr 16, 2007 09:49 PM Permalink
Savings bank interest is not calculated on avg daily balance. And don't compare credit cards with debit cards, it like comparing apples with oranges - they are two different things!!!
RE:even debit cards are as useful
by Rothin Bose on Apr 18, 2007 12:05 PM Permalink
savings bank interest is calculated on minimum amount in your account in between 10th and the month end of every month.
you must have noticed that charge slip mentions full credit card no.(i think exception is icici bank card / machine),while the credit card statement to the card holder hides 12/16 numerals. this is a pretty absurd situation. as a security precaution traders should only make reference to transaction Id.in their bills and partial card nos.
you must have noticed that charge slip mentions full credit card no.(i think exception is icici bank card / machine),while the credit card statement to the card holder hides 12/16 numerals. this is a pretty absurd situation. as a security precaution traders should only make reference to transaction Id.in their bills and partial card nos.
RE:BALANCE TRANSFERS
by sumeet on Apr 17, 2007 02:47 PM Permalink
thats completely right.. three cards offer balance transfer.. they are sbi,deustche bank and hsbc bank (free of any interest). I suggest you to take this cards.. and you can rotate your balance throught out life time.. you will always be Rs. 50000 in life take my word.. i am doing it personally..........
RE:BALANCE TRANSFERS
by Vinayak Patil on Apr 18, 2007 03:22 PM Permalink
Balance transfer is great idea if implemented properly. You can transfer balance to another card, but make sure to put that card into locker. If you use that card to purchase anything, you get into trouble. Let me explain. If you have 50000 in card A which you balance transfer to card B. So your card B holds balance of 50000 interest free for incoming 12 months.
Say you purchase 5000 worth of item on card B, your total balance will be 55000. If you pay 5000 in next statement date, it will minus 5000 from 50,000 and NOT from purchase of 5000.
Your 5000 purchase will keep incurring interest until you get rid of your 50000 balance transfer.
Credit card payment operates in this way: When you pay towards balance of your credit card, that payment is allocated towards least interest items.
So if your card has 6000 Rs cash withdrawal, 5000 of purchase & 50000 of balance transfer; payments will be allocated to balance transfer first, second to withdrawals and then cash withdrawals.
So best option when you do balance transfer is to lock credit card into locker until you get rid of balance.
