How to make judicious use of your credit card

financialexpress.com:

As per a recent RBI report, credit card outstanding balance has crossed the 2-lakh-crore mark in April 2023. This is nearly a 30% rise from April 2022. Though such increase in spending shows confidence in using credit cards, it also necessitates a discussion around the judicious use of credit.

One of the main reasons why people tend to overspend with credit cards is that they get an interest-free credit period of up to 50 days and the actual payment is postponed to a later date. However, users must understand that irresponsible usage and repayment behaviour can quickly lead to a debt spiral as credit cards carry hefty finance charges and late payment penalties.

Let us understand how these penalties can push you into deep debt.

When you spend beyond your means and cannot afford to pay at least the minimum amount due by the due date, late payment charges will be applicable. Late payment charges usually depend on the total overdue amount. For instance, you may have to pay Rs. 100 if the dues are up to Rs. 2,000 but for total dues above Rs. 25,000, you may have to pay Rs. 1,000.

An important point to note here is that by paying at least the minimum amount due by the due date, you can avoid late payment charges. However, finance charges will be applicable on the unpaid balance, as discussed in the next point.

Also Read: Income Tax Return: 10 ITR filing mistakes which can cost you dearly

Many cardholders still think that paying the minimum amount due is enough. However, when you pay any amount less than the total due, the remaining balance will start attracting finance charges, which may range from 20% to 44% p.a. depending on the card. Moreover, when there is unpaid balance on your credit card, new transactions become