Part payment may cost you heavily

                                                                                         

The plastic money holders should carefully go through the terms and conditions before choosing to part-pay their bills. Even if the pays a major part of the billed amount, interest is calculated on not just on the outstanding balance, but on all subsequent transaction after the repayment. Revolving credit is a common banking practice and the source of income for the credit card companies. So the card users should go for a judicious credit card payment to avoid any sort of credit card debt piling.

How the partly credit card repayment can cost you adversely can be shown with the help of an example. Suppose you pay 90% of the billed amount and only 10% is left for latter payment. In the next month, you have to pay interest from the date of the first purchase and in this way you loose the interest-free credit period. When you partly pay the credit card bill, not only do you pay interest on the outstanding amount, you also lose interest-free credit facility available for that period.

The pre-determined charges associated with the credit card are mentioned in the booklet which comes along with the card. This charge covers all terms and conditions, but few customers bother to read it. As a major chunk of card user is not aware of these charges, it can not be challenged at the banking ombudsman's level also. As in the eyes of law ignorance is no excuse. The card holder has previously accepted the terms by duly signing up for the plastic money. After RBI's 2007 master circular on credit card operations of banks, clear listing of charges has been made by the credit card companies.

The guideline of Reserve Bank of India clearly states that Card issuers should quote annualised percentage rates (APR) on card products. The method of calculation of interest on the basis APR should be given with a couple of examples for better comprehension and easy credit card repayment on the user's side. The manner in which the outstanding unpaid amount will be included for calculation of interest should also be categorically shown with prominence in all monthly statements of the user. These aspects should be included in the welcome kit of the credit card as well as in the monthly statement.

Generally the interest rate on a credit card is high. The card users are advised to use it only as a short-term credit facility. Financial experts advise consumers who are likely to face a credit card repayment crunch to opt for an EMI (equated monthly instalment) option. With the EMI option, the interest rate too works out to 18-24%, which is a lot lower than the interest the consumer pays on his credit card's outstanding balance. The customer must, however, note that the EMI option is normally valid only for a particular transaction and not for the total outstanding balance. When the customer is unable to make credit card repayment within his monthly income, he/she should take a personal loan

It may be noted here that currently Indian banks are charging the credit card holders interest ranging from 36 to 49 per cent per annum due to the default in credit card repayment. Indians card users pay some of the highest interest rates in the world. American card holders pay around 13 per cent only while in Australia also, rate of interest varies from 18 to 24 per cent and in Hong Kong SAR from 24 to 32 per cent. Indian banks charge ‘exorbitant’ interest rates on one ground that the credit card holders’ fail to make full payment on the due date or paying the minimum amount.

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