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Published: 01st November 2012
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A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction.
Credit cards are one of the most popular forms of payment for consumer goods and services.
Credit Card can be used in a prudent manner by some of the following ways:

1. Pay the full outstanding balance
The first and the most important thing to bear in mind is that you should pay the entire amount due, and not just the minimum amount due. The card companies make the most money by charging the interest on the borrowed amount and the interest is hefty anywhere from 24% to 42% per year.
Therefore, the full outstanding amount should be paid for every statement period.

2. Do not transfer the balance
This flows from the first point – when you transfer the balance to another card, you are not paying back anything. You are just shifting your liability from one card to another.
One should pay the amount in full, instead of transferring the balance.

3. Do not withdraw cash
If Credit card is used to withdraw cash from ATMs, you have to pay the heavy interest on such withdrawals from the same day, you do not get any grace period for cash withdrawals. You're also charged an automatic fee, usually around 2-4%, on the amount of the cash advance in addition to a higher interest rate than what you're paying on the rest of your credit card balance.

4. Opt for cards that are lifetime free
Another cost that you incur on credit cards is the “annual fee”. Most cards waive off the annual fee for the first year in order to attract new customers. But many companies also offer credit cards that have no annual fee ever. These are popularly known as “lifetime free” credit cards. The person should opt for these as far as possible so that you don’t have to pay the recurring, yearly fee.

5. Don't Use Credit Card for Everyday Items
Except in urgent circumstances, you should have your budget under control enough that you can at least pay for your monthly necessities with your monthly income & not by using credit card as they offer high interest rates, for purchases like groceries and utility items use the income to pay off the bills rather than using your credit card. Like: that a Rs.35 per litre of milk purchased with a credit card can quickly turn into a Rs. 50 per litre of milk if you don't pay off the balance at the end of the month. There's no need to incur interest charges on necessary items that you should be paying for with your monthly income.

6. Credit card use for online shopping
Although the numbers are increasing for online shopping, consumers are still not using their credit cards on the Internet. Cyber-shopping may be convenient and some people do all of their shopping online, but credit-card fraud is always a threat, both on the Internet and out in the real world. If the person is using credit card for online shopping then he should take care that password is not shared with anyone, always keep a list of the transactions and the amount charged, and check monthly statements etc.

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