Everything You Need to Know Credit Cards Rules to Avoid Penalty

The credit card user base in India reached 47 million in 2019, and it is expected to grow at a CAGR of 25% during the five years from 2020 to 2025. India being a debit card market primarily, these numbers indicate a major shift in transactions and customer behavior.

Credit cards offer effective financial support even during any emergency. It allows users to manage the crisis in hand without worrying about the cash available to them. However, like any other financial product, there are some credit card rules that users must abide by to get the best out of these cards without attracting penalty charges.

The penalty charges attracted by credit cards are high, and they can put users in a debt cycle. Therefore, it is essential to keep these tips in mind while using these cards and to repay the due amount.

6 steps to avoid credit card penalty charges

Know the billing cycle

A billing cycle usually stretches for one month. For example, it may start from the first day to the last day of the month. Otherwise, it can start from the 11th day of a month and continue until the 10th day of the following month. 

Transactions made during this period reflect on the monthly credit card bill. Thus, users must be aware of this cycle to plan their repayments accordingly.

Understand the due date concept

Every credit card has a payment due date, which is usually 15-20 days from the end of the billing cycle. If individuals repay their dues within this time, it will not attract any penalty charges or interest charges. 

Therefore, depending on the day of purchase within a billing cycle, individuals should know their payment due date. Thus, individuals must learn how to read their credit card statements correctly.

Pay the minimum due amount

Every credit card bill reflects two amounts that you can repay, either the entire amount or the minimum due amount. As the name suggests, the former is the minimum amount that users can pay to avoid incurring additional interest on the dues. Typically, this amount is 5% of the entire outstanding balance. However, it can be higher due to reasons like if customers have purchased a product on EMI via credit card, have exiting debt on that card, etc. 

In case a cardholder cannot afford to pay his/her whole due amount, he/she can choose to pay the minimum due amount to avoid paying penalty charges. Every individual must be aware of this credit card rule.

However, it is always recommended to pay the total amount due. It is one of the ways to reduce credit card interest and save money. Paying the full payable amount also improves the cardholder’s credit score. 

Keep ATM withdrawal to a minimum

Every credit card provider allows its customers ATM withdrawal facility. Here, users can withdraw cash from ATMs at any time. However, companies charge a hefty interest in addition to processing charges when cardholders make such withdrawals. 

Only a few credit cards like the Bajaj Finserv RBL Bank SuperCard don’t charge any interest for up to 50 days on cash withdrawals from ATMs. 

Apart from this, the company also provides pre-approved offers that shorten the process to avail credits and help applicants save time. Pre-approved offers are available on credit cards, business loans, personal loans, etc. Users can check their pre-approved offers by submitting essential contact details.

Do not skip any payment

Users must pay their monthly bills and try not to skip any payment. Doing so attracts penalty charges and additional interest on the amount. Moreover, it hurts the credit score of the individual. There are several modes of online credit card payment that they can benefit from.

Monitor usage

A fundamental credit card rule to avoid penalty charges is to monitor its usage. A convenient way to do so is to keep the credit utilisation ratio under 30%. It not only helps to keep the spending under control but also does not affect the credit score.

Thus, individuals can keep in mind these fundamental credit card rules before they apply for one online. Abiding by the same can save themselves from accumulating debt.