Credit cards and their dirty little secret
Getting a credit card is often seen as a major shift in how we see our finances when compared with our parents. It is indeed a great short term lending product that can help manage our finances in an effective manner, but did you know that only around 80% of Indians pay their bill in full on time?
You might say that, “I paid ₹20,000 of the ₹20,100 I got as my bill. I can pay the 3% monthly penalty on the remaining ₹100 next month. How does it matter, dude? 100-rupiah ka toh 1 litre petrol bhi nahi aata aajkal!”
I might not take offence at you calling me dude inasmuch as you realizing that you do not pay the 3% on the ₹100 alone but on an amount much larger than that. Let’s understand
Typical credit card bills are generated on a monthly cycle (30 days) with an allowance by the company to keep the amount for that cycle outstanding for 45 days. This means that if your billing date is 30th April, you can pay that amount by 15th May without incurring any charges. However, if you don’t pay your bill in full by 15th May, your credit card company will not only penalize you for the outstanding amount but also for the expenses made on the credit card between 30th April and 15th May! So, if say of that 20,100, you spent 16,000 on airpods on 5th May, you’ll have to pay interest for those airpods too on top of the measly interest you were paying on ₹100 outstanding. This holds true even if you are short by ₹1 in your payment. This is dirty and I know it, but we thought you should too
So, no matter what, pay your credit card bills in full always. This process of moving your credits (debt) to next month is called as ‘revolve’ and revolving credits are detrimental for folks who don’t understand it
This was inspired by Deepak Shenoy. All credits to him!
That’s all for now.
Take care and don’t watch Radhe. Or watch it. Who cares, dude!
Things which are off-topic and are still included in this post
inasmuch
PHRASE
You use inasmuch as to introduce a statement which explains something you have just said, and adds to it.
[formal]This was a good decision inasmuch as it worked for you.