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How to use your credit card smartly

Last updated on: November 25, 2013 17:57 IST

How to use your credit card smartly

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In an online chat with Get Ahead readers on November 25, Harshala Chandorkar of CIBIL answered queries on various aspects of using credit cards, payment defaults and how it affects your credit score.

Here's the unedited chat transcript:

Amol Dhurve: hello I am interested in getting a credit card from your bank. please guide me through the process

Harshala C: You will have to fill in the application form for the credit card of the bank of your choice. Make sure you have done a comparative analysis to check the fees charged, rate of interest, days of credit, other features of the card, etc. The bank will typically ask for you address and ID proof and 3 months salary slips.

Do ensure that you have accessed your CIBIL Report and Score before applying for the card. All banks check a consumer's CIBIL Report and CIBIL TransUnion Score before approving the card as part of their risk management practices

umar khan: I had SBI credit card. Card was stolen & misused for Rs.10000/-. On same date i have acknowledge the customer care officer . Can SBI charge me whole amount? 2. I am asking SBI to show charge slips where my signs are matching.Please suggest how should I handle this.

Harshala C: Please write to the consumer grievance redressal cell of SBI Cards to address your complain.

Venkatesh: I need a Credit card with free life time charges and that card must be a shopping one. Prefer me the cards.

Harshala C: Most of the banks nowadays do not offer a card which is free for life time. You can however do a comparison as to the fees charged by various credit card companies and then select the card of your choice.

rittika negi: is minimum paying of credit card amount offer safe?

Harshala C: When you regularly pay only the minimum amount due on your credit card, the bank will report no amount overdue on this account . However you must remember that the bank will charge interest on the amount that you have not paid and also on all new purchases that you make on the card from the date of billing. The rate of interest is typically high on credit cards

milind_kulkarni1234@rediffmail.com: Some merchants do not accept credit card,what to do?

Harshala C: You will have to pay in cash if they are not accepting credit cards.

Nitin Deshmukh: Dear Harshala, how can use of credit card affect my CIBIL score?

Harshala C: The CIBIL TransUnion Score is a 3 digit numeric summary of an individual’s credit history. The Score is derived by using the details found in the "Accounts" and "Enquiries" sections on the CIR and ranges from 300 to 900 points. Credit Cards will also be included in the Accounts / Loans that you may have availed. Number of cards, defaults on the cards will have an impact on your score.

Aatish Jagmanani: I have 3 credit cards. How can I use them to maximize my credit period. The cycle runs on the 10th, 20th and 30th of every month.

Harshala C: It is best to spend only so much that you are able to repay. You may fall into a debt trap if you spend more on your credit cards and are unable to repay them back.

Riyaz Sheikh: How can I improve my CIBIL score using credit cards usage? Could you give me some tips?

Harshala C: Tips to improve your credit score:• Always pay your loan/ credit card dues on time• Maintain a healthy mix of credit• Apply for new credit in moderation• Monitor your co-signed, joint accounts monthly. • Monitor the loan accounts for which you have stood as a ‘guarantor’• Review your credit score and history frequently

Ravi Prakash: What is the procedure for closing of credit card.

Harshala C: Write to the bank informing them about your decision to close the card. Make sure that you get a credit card closure letter from the bank. Also ensure that all your dues are paid in full and there is no outstanding on your card.

Mahima Das: Want to know madam how to best use a credit card and a co-pay card? I have given the co-pay card to my daughter.

Harshala C: Both the credit card and the 'Add on' card will have a credit limit. Make sure that you are comfortable on the limit assigned to your daughter;s card. You will be responsible for making payments on her card as well as your card. Do have a discussion with your daughter on the credit card usage and the limits. She should also be informed about how to ensure the safety and security of the card.

Nirupama Trivedi: What are the effects of settlement on my credit status? Want to go for ahome loan but the lender has asked me to first close my crdit card dues. How can I finally put everything behind me? How much will i have to pay and what kind of documents shall I get from credit card co to produce before the lender?

Harshala C: If you have not paid all you loan / credit card dues, the bank would have reported the amount over due and the days past due on a month on month basis. These defaults will impact your score. Once you repay the amount that is outstanding the bank will report the same to CIBIL. You will have to demonstrate a positive credit behavior for atleast 6 - 9 months for your score to improve.

Ravi Prakash: If i pay all the dues and closing of credit card can be any effect in credit rating?

Harshala C: We will have to look at your credit report in entirety to determine the impact of this event on your score.

Vaibhav Pathrikar: I have settled two CC and I am again bills for those but I have closure letter what can i do in this case

Harshala C: Write to the bank's Customer Grievance Redressal cell to address your complaint.

sanjeev gupta: HOW TO CLOSE MY CIBIL

Harshala C: CIBIL collects credit information pertaining to borrowers from banks and credit institutions. It then collates this information into credit reports and provides them to banks to help them evaluate risk while lending to a consumer. If you have credit cards and loan bank will report this information to CIBIL.

jay nambiar: I have settled my CC seven years ago, but my name in CIBIL is still not cleared. What is the reason for it?Jay N.

Harshala C: If the bank continues to report your data to CIBIL it will be reflected in your credit report. However do ensure that the reporting is correct. You can access your CIBIL Report and Score and check to ensure that there are no inaccuracies.

Rajan sha: The amount charged on my statement is different from the amount on my receipt

Harshala C: Please write to the customer care cell of the bank, give them the proof of the receipt to get the amounts corrected.

Cynic: Does CIBIL acts and assign solely on the statement of creditor without referring to the debtor? Is such a process and its score justified?

Harshala C: The Credit Information Companies (Regulation) Act, 2005 mandates CIBIL to collect the data from credit institutions. However if you believe there are any inaccuracies in your report you may raise a dispute with CIBIL.

Vaibhav Pathrikar: how to improve CIBILrating spoiled due to credit card settlement and lien process

Harshala C: You can improve your credit history and score by ensure that you make timely payments on all your loans and credit card dues. You score will improve over a period of time once you start making timely payments on all your dues

sandeep gaikwad: My CIBIL score last year was 590 and now i have not checked if it is nearer to 700 points shall i get the loan

Harshala C: Each bank has its own credit policies and decide a cut off score. Do access your report again to check the improvement in your CIBIL TransUnion Score.

SIMANCHAL BISWAL: what is the minimum requirement of CIBIL number for home loan..

Harshala C: While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above

Anish Kumar: I had voluntarily decided to close my CC. When I called up the call center, they informed me the final due amount which I promptly paid and gave a letter to close my CC (in 2007). After some 3-4yrs, I got a call from the bank that I haven't paid the dues for my CC (which I had closed) and they had marked me as defaulter. How can I fix the CIBIL now

Harshala C: Raise a dispute with the bank, since you had already closed the card and presumably have a card closure letter with you.

SIMANCHAL BISWAL: i Have three credit cards but paying my dues on time. i want to have a home loan please suggst what to do ,should i check my CIBIL before applying for loan.

Harshala C: You should access your own CIBIL report and CIBIL Trans Union Score. Steps to be followed:• Step 1: Fill online form- Visithttp://rediff.ly/1gsxk and duly fill in the online request form • Step 2: Payment – Make payment of Rs. 470 via Net banking / Debit / Credit / Cash Card• Step 3: Authentication – Answer 2 questions based on your credit history

If you are successfully authenticated you can download your credit report consisting your credit score and also receive it via e-mail. If you fail the authentication then you can upload scanned copy of your identity proof and address proof on CIBIL’s website. The report will then get delivered to you via express delivery

dananjaypuri: I want to buy a gold ring for my wife on our wedding anniversary. Is using credit card the right way for going about it?

Harshala C: Credit Cards are used by consumers for buying jewellery. As long as you have the repayment capacity you may go ahead and buy the gold ring.

vaishali: What kind of payment charge am I liable to pay if I am late on my monthly payments?

Harshala C: If the payments pertain to credit card dues, the rate of interest typically charged by banks is approximately 36%. Do check the Most Important Terms and Conditions (MITC) for your card. This will have the details for penal interest and late payment fees.

sachin ganguwar: There are cards offered on Fixed deposit to improve our credit scores, but an institute from where i have CC (against FD) has not reported the same from last 8 months. what the point in issuing CC against FD and not reporting to CIBIL??

Harshala C: You may check with the bank as to why is your card not being reported.

rajeev kulshrestha: If I am paying minimum amount per month .. inthis case the credit rating downgrade or remain same

Harshala C: As you have been regularly paying only the minimum amount due on your credit card, the bank will report no amount overdue on this account and therefore your credit score will not have any negative impact.

Jeswal: After how many years of final settlement will the banks again start giving me a credit card? I had disputes with HDFC Bank and ICICI Bank credit cards in 2004 but they seem to be still holding that against me. I have done a final settlement with them and my credit score is above 870. Still they don't consider my application. Why?

Harshala C: Each bank will have its own credit sanctioning policies. You may approach other banks and also state about the settlement done with these 2 other banks.

kiran kumar: After how many years of final settlement will the banks again start giving me a credit card? I had disputes with HDFC Bank and ICICI Bank credit cards in 2004 but they seem to be still holding that against me. I have done a final settlement with them and my credit score is above 710. Still they don't consider my application. Why?

Harshala C: While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above.

naveen kumar: I have settled one credit card Citi bank outstanding of rs. 400/- which wrongly came in the year 2008, will it show in cibil till now, i wanted to apply for home loan shortly kindly advice how to go about it?

Harshala C: Do access your CIBIL Report and CIBIL TransUnion Score before applying for the home loan.

You can access your credit score and report on CIBIL’s website in 3 easy steps:• Step 1: Fill online form- Visit http://rediff.ly/1gsxk and duly fill in the online request form • Step 2: Payment – Make payment of Rs. 470 via Net banking / Debit / Credit / Cash Card• Step 3: Authentication – Answer 2 questions based on your credit history

If you are successfully authenticated you can download your credit report consisting your credit score and also receive it via e-mail. If you fail the authentication then you can upload scanned copy of your identity proof and address proof on CIBIL’s website. The report will then get delivered to you via express delivery

milind_kulkarni1234@rediffmail.com: Is CC portability present?

Harshala C: You will have to close your existing card and then open a new credit card account.


Photographs: Uttam Ghosh/Rediff.com