In an online chat with readers on October 14, Anil Rego answered their credit card queries.
Here's the unedited chat transcript:
vaishali: Sir, i have a huge credit card balance above 20 K. I only keep on paying minimum amount due. Is that good strategy? how do i clear my dues. I am depressed.
Anil Rego: Paying only minimum amount will only help in short term as the balance also needs to be cleared. We would recommend that every month you keep aside a certain portion as savings and use it to pay off the credit card debt.
Vinu Murthy: I have 1 credit card which i am using for last 8 yrs. my credit limit is high but i dont use much except air tics or train booking. do i need to go for other cc? My one cycle statement bill comes aroud 3000.
Anil Rego: You can choose to have one more, though your use is quite limited. The same can be used for emergencies i.e. you will have enhanced credit limit adding both the cards. Also choose a card which comes without annual charges/joining fee.
Jeswal: I noticed last week that 6 months back there was a late payment penalty of Rs 1000 in my card statement.. check cleared took time.. can that money be reverted.
Anil Rego: The same needs to be checked with the respective company. you can request them asking to reverse the same.
Seema Dutt: what is the best way to avoid credit card debt?
Anil Rego: Pay the bills regularly on the mentioned due date. Thus you don't have any outstanding.
Anand: I have a huge Debt on Credit card, I keep paying the minimum amount due but unable to pay the entire amount. I have requested bank to waive off interest which i repaid and convert outstanding to EMI or personal loan they are not paying heed what should i do?
Anil Rego: Usually banks do offer this option of converting the outstanding amount to EMI. We would recommend to discuss the same with the grievances cell rather the customer care department.
Seema Dutt: Hello sir, I just started on my job. Many companies are offering me credit cards. But my elder brother tells me that it is any day better not to have a credit card. Is not having a card at all the right thing to do?
Anil Rego: If you are a disciplined user then having a credit card will not have an impact on your financials. Also credit cards can be used for emergencies.
Gurshan Gurmeet: Can a personal loan be taken on the credit card?
Anil Rego: There is no loan on credit card. It's the amount used by swiping every time you make a purchase.
sundaram: By having more credit cards, does our credit rating maintained by CBIL hit a lower score? And what are the implications of taking loans from Credit cards which offer personal loans at a much lower interest rates than the market? Do the Credit card vendors add an entry into CBIL at the time of issuing a loan against your card taking anther hit on your CBIL score?
Anil Rego: A high number of credit cards and high usage of the same will have an impact on the CIBIL score. Loan taken from the credit cards or any other banks/institutions is updated for the CIBIL score.
dinesh: SCB regularly offeres to convert my card outstanding to EMI is that a good option?
Anil Rego: If you are unable to pay the outstanding and also if the interest impact is not high, the same option can be considered. But it is advised to understand all the charges applicable in detail.
kunika: my bank keeps rejecting my credit card upgrade request from Gold to Platinum, but does not give reason why. What could be reason?
Anil Rego: Reasons could be... Poor payment history; Cibil score; other existing loans
anil: On what criteria is credit card issued? My gross is 8500 pm and I got a credit card for 20,000 even though i applied for a platinum one.
Anil Rego: Criteria is based on income, other loans, credit score, and spending habits.
Anil Sharma: I have taken cash 4000 from credit card. how to pay it only this amount .coz i have other due amount also
Anil Rego: You can repay the same either via Cheque or through online payment gateway.
sheetal: Sir, i had gone for a settlement against the loan i had taken form HDFC bank, will that have a negative effect on my cibil record, will i get a loan in future?
Anil Rego: You need to check whether the banker has updated the CIBIL about the closure of the loan. If the same has been reported positively then it won't have an impact on your CIBIL score.
Gadgets-Gaming: How do credit card companies calculate APR? How costly it is compared to other interest rates?
Anil Rego: Usually rates (late payment) charged by the credit card companies is quite high... can be as high as 36 per cent. This is one of the highest as loans for other purposes are available in the range 10 per cent - 20 per cent.
Sonal: Hi sir, I am a salaried person so mostly i try to pay my credit card dues from my bank account but at times my credit card is used by my close relatives for air tickets and in return they give me cash. Is it safe to pay your dues in cash and whether such transactions will be questionable by income tax or not in future. I am very disciplined in using my credit card.
Anil Rego: We would recommend to avoid cash transactions and pay through your online net banking.
Hiya: I have taken HSBC credit card 4 yrs back. at that time they have give me bill of 4500/- when i asked it should be 2900 they said OK we will give you this in next month but paid 2900 so i paid & same was written on back of cheque. after that i have not recd. bill .now they have sent me 22000 rs bill though the validity is expired. pl. let me know what to do.
Anil Rego: At first write an email which shall be a written form of conversation and will also have a record of communication. Inform the details to the grievance department also submit soft copies of the statement. If not sorted by HSBC then you can also choose to approach through the legal way.
Vinit Araj: I had a settlement of my SBI credit card long back but they have given my name in CIBIL. is it right and can i chalenge this? How can i get my name removed from CIBIL?
Anil Rego: If you have complete documents which mentions the details about the complete settlement and also a letter from the bank which clearly states that your outstanding dues have been settled then the same documents can be used.
Vinod Thour: Is it a good idea to have multiple credit cards, my friends say if used smartly it saves a lot.
Anil Rego: Yes, as different credit cards have different billing cycles which you can use smartly. However any miss-out on payment side will attract interest and also have an impact on your cibil score.
Gajanan Bose: Last month credit card issuer had offered me to change my regular card to gold card as i am a disciplinary payer of card bill every month. I had confirmed them to change my regular card in to gold card. But i have got statement containing additional charges of Rs 1000 as converting regular card in to gold card. How to get reversed?
Anil Rego: Ideally there are no charges for such upgradation as it is offered by the bank since you have a good credit history. However in such cases the banks should have informed you in advance about the charges. You should apply to roll back to your previous card limit.
hardik: I haven't used the Axis Bank Credit Card for more that 5 years now during my last request with bank to close the account, which they did. Now bank is saying as per RBI guidelines, they had re-issued the chip card to me, which i have not asked for, i don't know for which they sent they are asking me to pay 1500 rupees as the penalty charges. What can I do now?
Anil Rego: Credit card is taken as per a person request and cannot be forced. We would recommend to have a mail communication with grievances department and also with the customer care. Also ask them for the RBI policy document which mentions such a clause.
Raju Bhatt: What does credit card APR mean?
Anil Rego: APR stands for Annual Percentage Rates i.e. interest rates applicable
Megha Nambiar: How do we use our credit cards to our advantage without also over using them to the point where they become a problem?
Anil Rego: Limit the use of credit cards, only use them while purchasing important items like groceries or paying utilitiy bills. Using credit card for other expenses like shopping etc may spoil one's spending habit and have an impact on one's finances. Also make sure to regularly pay the bills.
Siraj Memon: Does paying the minimum amount against the outstanding amount of credit card affects the CIBIL score?
Anil Rego: If the same continues for a longer period of time, it may have an impact on the score. Ideally a default in the payment has a high impact on the Credit score.
Raju Vohra: How to keep maintain an healthy credit transaction?
Anil Rego: Every time you initiate a Credit Card transaction, make sure you make a full repayment as per the billing cycle of the credit card. In case you do not have sufficient cash to make full repayment, you can even pay the minimum amount payable and repay the balance later. But do not miss the payment date.
Photograph: Lee Morley/Creative Commons