If used with Discipline, A Credit Card is an excellent tools. It helps you for net banking, great discounts, reward points etc. But there is a line here. Most of these discounts will drive you to spend more than you actually can.
Another way the card can harm you is the rollover facility. You buy 10K and pay 500. If you do that, the pain starts. Most of the cards charge about 41% annual interest on the card roll over. though there are illustrative examples everywhere, it is still rocket science. The simple thing to remember is that once you rollover, your free credit ends and you will be charged with heavy interest from day one.
Never withdraw cash using a credit card. You will start with an escalated credit by 2-3% + the interest on all transactions from that day onwards. This is way costlier than a personnel loan.
If you start paying the interest, it becomes a vicious circle. so vicious, that i knew of people who paid only interest of more than 5 times than they spent actually and lost face in the society for the visits of the so called “recovery agents”
with all the above, I still believe that a Credit card is an excellent tool but the only thing to look is caution and discipline. Please know that the Bank is not giving you free money to spend. They are offering you only credit which is to be paid within short term or else they are going to charge you through you nose.
Discipline, discipline and discipline is the only control which can make you enjoy the benefits offered by credit card.
Originally posted 2011-03-25 15:38:00.