Urban Indians have started using their credit cards and debit cards a lot more than usual after the cash crunch caused due to demonetisation. Debit cards cannot be used if you do not have sufficient balance in your account. Credit cards will give you the loan temporarily but you will have to repay it. Often, credit card repayment is associated with hefty interest rates. Thus, it is extremely important for all the credit card users to learn the safe ways of using credit cards so that they do not end up with a massive bill at the end of the billing cycle. Overspending on credit cards can also lead to a drop in the credit rating which also brings down a person’s credit worthiness.
According to one of the senior officers of HDFC Bank, there has been an increase in debit card transactions by 4 times after demonetisation. As per Axis Bank, the usage of debit cards has spiked by 100%. The transaction volume for credit card has gone up to 30% in this short span, according to Vijay Jasuja, CEO of SBI cards.
MD of JLL retail services, Pankaj Renjhen, feels that demonetisation is going to influence several shoppers to make use of plastic money in the long run. He added that the usage of e-wallets, debit cards and credit cards goes up in malls when the big sales arrive. This happens mostly when fintechs (financial technology companies) and banks offer discounts and cashbacks.
As per several financial experts, the abrupt and uncontrolled rise in credit card usage can invite trouble. As per the MD of Experian Credit Bureau, Mohan Jayaraman, a person must ensure that payment towards credit card dues must be made every month. At times, credit card users fall into debt traps by only paying the minimum due amount over the outstanding balance on the credit card. Eventually, this leads to huge credit outstanding for the credit card holders.
It is highly advisable that all expenses on the credit card are monitored. Jayaraman added that if the spends or utilisation rate goes out of control, then it can have a negative effect on the credit score.
Certain things that you must do with respect to your credit card usage are as follows:
Bottom Line – Credit cards can be of great help if you use them wisely. Do not spend what you cannot repay. Ensure that you make the payments towards your credit card outstanding balance on a regular basis until the debt is cleared.