August 25th, 2012 by bemoneyaware
Credit card have made life for shoppers simpler. Carrying cash can be cumbersome and dangerous at times. These cards can be swiped at almost any establishment. You can also withdraw cash on your credit card but Credit cards aren’t free. As Spiderman said “With great power comes great responsibility” and these credit cards have various charges,fees associated with them and if not used judiciously can lead one to debt trap. Let’s become aware of terms, fees and charges related to credit card. In the article for example we have taken HDFC cards as they are most used card in India. The terms and conditions of HDFC cards can be seen here (pdf). You can also see the most important terms and conditions of State Bank of India (SBI) cards at their webpage :SBI:MITC
Part of sample credit card is shown below. The terms like Statement Date, Credit Limit etc are explained .
Credit Limit. Your credit limit is the maximum amount you can charge on the card. This includes purchases, balance transfers, cash advances, finance charges, and fees. Different cards have different credit limits. Credi card issuers determine the Cardmember’s Credit limit and cash withdrawal limit based on their internal criteria. Usually a platinium card will have more credit limit than the gold card. When you go over your credit limit, your creditor may charge a fee, an over-the-limit fee. For
the credit card sample show the Credit limit is Rs 2,75,000.
Balance : The balance on your credit card at any given time is the total of your purchases, finance charges, and credit card fees. The higher your credit card balance, the lower the available credit you have to make additional purchases. For the credit card sample show the Balance/Total due is Rs 18,238.15. Available Credit limit becomes Credit Limit – Balance which in the above example is Rs 2,75,000 – 19,238.15 Rs or Rs 2,56,762
Billing Cycle and Grace Period : The billing cycle is the period of time between billings. At the end of the billing cycle, you are billed for all unpaid charges and fees made during the billing cycle. Your credit card payment is due 20-25 days after your billing cycle ends. The period of time between your billing cycle end date and your bill due date is known as your grace period . A billing cycle may start on the 1st day of the month and end on the 30th day of the month. Or it may go from the 15th of one month to the 15th of the next. Billing cycles are varying lengths, ranging from 25 to 45 days, depending on the credit card and the issuer. Remember If you carried a balance from the previous month, you do not have a grace period for your new purchases .