Credit cards

Some more on credit cards When comparing credit cards, don't waste time on the discounts and similar benefits these cards offer. Chances are that you will never use them. How, for example, do you feel about asking for a discount at an expensive restaurant?

Don't buy the sweet talk that credit card salesman Ex use to sell you their card. They tell you all the advantages but don't tell you the hell you could be getting into if things go wrong. And in the absence of any regulations to regulate credit card issuers and their practices, they have a field day.

Credit cards can turn into a nightmare. Here are few things you want to do.

If you return your card to the bank or it expired, cut it into two before you give it.

Don't give out credit card information on any application form.

You don't have to disclose credit card information on cards you already have to agents if you are applying for a new card.

Let the card issuer know immediately if you lose your card.

Before signing a merchant slip, write the amount in words too.

Moreover, if your credit card is stolen or misused, you still have to pay up. In the US, if your card has been misused, your liability is limited to $50 per card by law. No such law exists in India and credit card companies will use all means to collect. Some cards do have insurance to cover card misuse. So take a card that has such coverage. But remember, it's not going to be easy. Credit card companies tend to be cynical about claims of card misuse. They will deny it, but just report such a complaint and see the kind of harassment you face.

How do credit cards work The credit card business is in the hands of players like VISA, MasterCard and American Express. And no matter which bank has issued you a card, all transactions pass through the same players. When you pay by credit card and sign a receipt, the receipt works like a cheque for the merchant who gets it. He deposits it in his bank. The bank sends the transaction to MasterCard or VISA (whichever logo shows up on a your card). MasterCard or VISA act as middlemen and withdraw funds from your card issuer (whichever bank is you took your card from) and pay it to the merchant. cheques. Now imagine the millions of people who have traveler’s cheques and the billions of dollars these companies have from people like you, and that too interest free. Moreover, traveler’s cheque issuers levy a service charge, usually around one per cent, to issue these.

And, if you lose your traveler’s cheques and you don't happen to remember how or when you lost them (which is mostly the case when you lose them), say goodbye to receiving a refund for the next four to six months. When you do get the money back it will be in rupees and you guessed it, they will make some money before refunding your money for the lost cheques. And don't even think of getting interest for the money they get to keep for a few months. Most issuers want a police report and send you through a process that makes you feel as if you stole the cheques yourself. Don't buy into the 24 hour replacement talk. Multinational issuers will of course honor that 24 hour replacement commitment, you might say. I wouldn't be too sure.

You can also take a credit card that allows you to spend in dollars abroad. But none of these cards that harp on the benefits of such cards ever tell you the exchange rate at which they will bill you in rupees. No points for guessing. It will be at rates that let them make a good commission.

CONSUMPTION AND SPENDING

The key to financial security is living within your means or spending less than you earn and investing what you save. It is not spending which is a concern, it is spending what you don't have or overspending. While some of us may believe in living for today, and taking care of tomorrow when it comes, chances are that when it comes you are going to feel miserable about the money so rashly spent. A number of factors drive us to spend more than we can afford.

Status consciousness Many of us try to maintain a lifestyle that people around us maintain. The only difference is that their financial situation may be much better than ours or they may be making the mistake of spending money they don't have. Younger people are I especially vulnerable as they spend to keep up with their friends. It's like spending less on a house's foundation to splurge on expensive windows.

Using credit cards

Using a credit card and not paying it in full is a sure invitation to financial mess. If you have a balance due on your credit card that you don't pay in full, all future purchases will carry interest charges on them without a grace period. And credit cards charge you interest rates that might remind you of the infamous moneylenders of rural India.

Buying consumption and household items on credit Cars, household items and vacations don't produce any income. Buying these items on credit means a drain on your future earnings. That is the money you could have saved and invested.

Overspending on the family Parents strive to give their children the best. But you could be sacrificing long term best for short term best. And the best does not always have to be material goods, like brand name shoes you roil cannot afford. You could instead give invaluable gifts to your children like a good education and a culture to : us cherish.