5 MinsNov 17, 2021
Divya Shetty got her first credit card a month ago. When her card statement arrived, she was confused about various charges. For instance, why should she pay the full amount due if she can pay the minimum amount due and continue using her credit card? Also, how is the interest rate for delayed payment calculated? Let us help Divya understand her credit card statement and the conditions that come with it:
Convenience but come with a caveat
Credit Cards are a great tool. But one must be careful while using them. While they offer a very convenient way to pay – either offline or online, one needs to remember that credit card spends are an unsecured debt provided by a bank. Most often, this debt comes at a steep interest rate between 2.5-3.9% per month. Hence, you should understand the rules before using them. A user's monthly statement is the best way to develop this understanding.
Here are a few points you should keep in mind:
Payment due date: Every statement comes with a date by which you have to pay your dues, at least the minimum amount. If you don't pay at least the minimum amount due, then banks would charge a late payment penalty. Late payments also tend to affect credit scores negatively.
Minimum amount due: This is the amount you have to pay in order to avoid paying the late fee. But it has to be paid on or before the due date. If you pay the minimum amount after the due date, the late payment fee will be levied. Also remember that even if the minimum amount is paid by the due date, banks will charge interest on the remaining amount.
Total amount due: This is a critical figure to look for. It includes the expenses incurred during the previous month and any unpaid amount that has been carried forward and interest on such an overdue amount. It also contains late payment penalties, cash advances, if any, and interest on them, service fees and taxes, among others. It is always advisable to pay the total amount and do so by the due date because any unpaid amount attracts interest.
[Also Read: Here's How You Can Get The Best Out Of Your Credit Card]
Billing Cycle: This is the time between two statements, typically 30 days. If you use the billing cycle optimally, you can ideally get 30 days of cost-free credit.
Details of Transaction: The statement will have a list of all your transactions-the merchant establishment, amount, and date. If you spot any discrepancy in the transactions, make sure you highlight the same to your bank and follow up for further action. It will also give you a good idea of where and how you are spending your money and help in using the card more responsibly.
Credit limit and other information: Credit limit is the maximum amount a bank will allow you to spend on a credit card. Once you reach it, the card will be declined. Other points to watch out for are the interest rate applicable, late payment penalties and additional charges. Banks tend to revise all of these from time to time. Hence, you should keep track of them regularly.
Reward points: Most cards come with a loyalty programme that rewards the user with points that can be redeemed either for discounts or deals. If you use them smartly, you can reduce your credit card bills considerably.
Axis Bank offers a range of credit cards that come with various benefits tailored to its customers' preferences. Customers are also entitled to Edge Reward points depending on their spending patterns. You can redeem them for a range of attractive deals and offers.
Know more about Axis Bank Credit Cards and how to calculate credit cards EMIs.
Disclaimer: The Source, a content creation and curation firm, has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.