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 What you Didn’t Know about Credit Cards

What you Didn’t Know about Credit Cards

It is not surprising to know that credit cards are expensive. Yes, cashless transactions can in fact end in an empty wallet if you aren’t careful. So, what makes them popular despite their exorbitant charges?

1.      The very fact that they are handy in times of emergency
2.      Serve as substitutes for money for multiple purposes (It is easier to handle a plastic card than wads of rupee notes)

Still wondering why it isn’t it a good idea to use a credit card?  Well, let us have a look at an example and understand this better:

For instance, in your current billing cycle say for the month of March is as follows,
1.      the total amount due is given as Rs.50000,
2.      the minimum amount due is Rs.1500,

Considering you pay only your minimum amount due,
1.      your current outstanding is: Rs.48500
2.      Interest charged is 3% on outstanding; which is Rs.1455

The total outstanding is: Rs. 49955 ~            Rs.50000

Let your new purchase in the next billing cycle (for the month of April) be worth Rs.25000

The minimum balance paid by you is Rs.2000

(Adding previous month’s balance to the current bill)

Now, your outstanding is: 50000 + 25000 – 2000 which is 73000

Interest charged at 3% on outstanding; which is Rs.2190

The Final Outstanding is Rs.75190.

Just think for a moment and see, you had already paid the sum of Rs.3500 which is the minimum dues put together for both cycles. And apart from this you’ll have to pay Rs.75190. which amounts to a total of Rs.77660.

Did you even know, that is a whooping 36% interest per year!

The next thought that comes to mind is to get rid of this evergrowing mountain of debt by..settling the card? But, will that help?

What does credit card settlement mean?

When the outstanding amount on your card exceeds way beyond your repaying capacity, the card issuer will quote a minimum settlement amount.

Once you settle your card, it means that the issuer will cancel all the outstanding on your card; this will end in your card being terminated.


Wait there’s more.

Settling your credit card can have one of the worst effects on your financial life. And that too on a permanent basis! Why you wonder?

You see, when your card is settled, your cibil score automatically gets lowered. Apart from that, from this kind of behavior the bank understands that you are not very good at repaying the money you borrowed.

Finally, ending in your loan application being rejected. Yes, such is the extent of defaulting on your credit card. This is precisely why you need to firmly say No to the option of settling your card.

Then again, what could be the solution to this? Well, lucky for you there is a way – in the form of Personal Loans. Which one would you prefer? An ever increasing outstanding worth 36% every year or a full stop to the plastic menace by transferring the outstanding on to a personal loan at 14% per year? That is almost 2.5 times a reduction in interest rate and a savings of thousands, even lakhs. You do the math and make your choice. Talk to us & we will get your credit card interest rate reduced.



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