A credit card can ruin your life. The same credit card can be your BFF just like your smartphone

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New Delhi: Close to eight crore credit cards are being used in India. Banks are luring new customers ahead of the festive season. Here’s what young Indians should keep in mind when signing up for a new credit card.

Case Study 1

* Akash Arora, 23, was sipping tea and smoking a cigarette outside his office when a lanky young man, slightly underconfident, approached him.

“Sir, will you be interested in our credit card? We are offering 1000 reward points on sign up.”

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Reluctant yet curious, Akash mustered courage to ask, “Am I eligible?”

The credit card salesman was quick to respond, “Sir, what makes you think you are not eligible? Anyone who can afford a cigarette is eligible for a credit card.”

“All you need is a salary of 25,000 rupees per month and six-months salary slips.”

One year later, Akash had an outstanding amount of 78,000 rupees and had already paid thousands in interest charges. Ultimately, his family of him came to the rescue and Akash vowed never to use a credit card again in his life.

Case Study 2

* Aditi Chaplot, 24, had worked for a year at an advertising agency in Mumbai and wanted to take a flight to her hometown in Odisha. Until now, she had been a regular customer of the Indian Railways. But there was a problem. Aditi needed around 15,000 rupees upfront to book a return journey. Her in-hand salary di lei was 27,000 rupees a month and she had managed to save about 24,000 rupees in a year. She also planned to buy a saree for her mother di lei. Aditi’s colleagues suggested she apply for a credit card. One year later, Aditi says she feels incomplete without her cell phone and credit card in the handbag.


There are hundreds and thousands of Akashs and Aditis who are introduced to financial products such as credit cards each year. Some of them learn to make wise financial decisions while others fall into the debt trap. So, why does Aditi love her credit card and what could Akash have done differently?

1. Monitor spending patterns

This is an often-overlooked aspect but one that could give you deep insights into your financial wisdom. Are you an impulsive shopper or a foodie who is a patron to multiple establishments in the city? Carefully study the pie diagram on your credit card bill and you could soon become a top-notch financial planner!

2. Pay up before the due date

Credit cards offer interest-free purchases for up to 45 days. It’s best to clear the bill before the due date. Any delay and you would end up paying late-payment charges which could run to hundreds of rupees. True, you have the option to pay the minimum amount. However, it’s prudent not to roll over any balance as you will soon find yourself in a debt trap if you make further purchases. As a last resort, you could convert your outstanding amount into EMIs without jeopardising your credit score.

3. No cash withdrawals, please

Most credit cards offer cash withdrawals but there’s a catch. Every time you withdraw cash, you will be charged a one-time service fee plus taxes. Moreover, cash withdrawals do not come with an interest-free period. You start paying interest from the day you withdraw the amount. Even a small one-time withdrawal could see your next bill shoot up drastically.

Remember, at the end of the day, a credit card is a financial instrument that makes transactions easier. A credit card can also be considered a friendly short-term lender. But it is certainly not a substitute for regular income.

* Names changed on request.


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