Credit Cards Boon or Bane?
Credit Cards are widely used by almost all sections of people worldwide. Credit Cards are commonly used for shopping - buying clothes, provisions, jewelry, consumer items such as TV, fridge, furniture, computers, washing machines, two wheelers and four wheelers. We can also book railway tickets, air tickets. By swiping credit cards we need not take cash with us for shopping.
Credit cards have credit limits. If one exhausted the maximum credit limit, he cannot use that card further. Many people exhaust the credit limits so fast. Then they have to repay every month on due dates. If the amount withdrawn is repaid within thirty days no interest is imposed. If not, a service charge of 2.95 percent per month is levied on the total amount outstanding. If we draw cash at ATM centers, a charge of 2.5 percent for the amount drawn as cash is levied immediately. At the end of each month service charge (interest) of 2.95 percent per month is charged on the amount outstanding and an additional charge of 12.24 percent on interest amount is also charged as service tax. Minimum amount payable to the card account is equal to 5 percent of the amount outstanding in the card account. The amount outstanding is equal to amount spent by card holder plus 2.95 percent interest plus 12.24 percent service tax.
If the minimum amount is not paid on due date, a penal charge of Rupees 600 is levied immediately. If the card accounts’ outstanding exceeds the actual credit limit, an overdue limit charge of Rupees 500 is levied immediately. Credit card holders are expected to pay the minimum amount due on or before the stipulated due dates.
If the minimum amount due is not paid on due date card holders used to get phone calls at regular intervals. The rate of interest charged 2.95 percent per month is very heavy. People cannot afford to pay such high rate of interest. Hence majority of credit card holders suffer economically and financially. They fall victims of card issuing multi national companies by loosing what all they earn and save during their lifetime.