Your goal should be to pay off your credit card bills in full at the end of each month and set aside money toward your emergency savings.
A credit card is a very convenient financial tool, but it comes with the risk of hurting you if you don’t respect when it comes to spending. When zeroing in on a credit card, ask yourself what you will be using the card for?? If you are going to use it for most of your financial transactions, evaluate if you will have the repaying capacity when the payment is due each month.
Next, look for a card with the lowest charges – these could be by way of annual fee, late fee and interest charges when applicable.
If you frequently use your card to refuel or buy airline tickets, look for a co-branded card to derive additional benefits. Most importantly, check the credit limits you are entitled to and make sure at no time this limit is so high that you get into a situation where you are unable to repay. As most cards come with incentives by way of reward points, do check what is on offer and how you can benefit from it before zeroing in on a credit card.
How does the credit card EMI offer work??
First things first, credit card companies make money by earning interest on late payments that you make. If you are paying off your credit card bills within the due dates then, essentially, you are not contributing to their profits. By enticing shoppers to make easy repayments on their credit card through EMIs, card companies have devised a system to make money. Yes, it does offer the cardholder respite with payment but, in reality, EMI on credit cards works like a loan – you pay the principal and interest each month and clear off your debt over a period of time.
Source: Outlook money, 17th anniversary issue.