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Just got your new credit card? Here's what to do!

By Rajiv Raj
August 07, 2015 13:35 IST
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The more you know about using a new credit card, the more you reap!

Owning a credit card means holding a double-edged sword in your pocket. If used well, it can bring a whole host of rewards, if not it might put you in a debt trap. If you are not familiar with what needs to be done once you receive it, then things may go wrong.

Many of us receive a new credit card through the mail, and we just want to activate it. There are certain things you need to do before you make your initial purchase, or before you put the credit card in your wallet. The following safety measures are mandatory for a healthy card usage.

Your new card needs to be activated

None of the credit card comes to you in an active mode for security reasons. Just call the bank/toll free number for activation. Most of the times you will have to enter your card number, followed by KYC (know your customer) questions (like your birth date, your mother’s maiden name, etc). Make sure you call from the registered phone number. Activate the card first.

Know the interest rates

Make sure that you understand the interest rate, to avoid the disastrous credit card story that many have. Firstly examine the standard rate of interest, which is determined by annual percentage rate.

Because, this is the rate at which you will typically pay your outstanding. Further this rate gets divided by 365 days and is applied to your outstanding on daily basis.

Read the terms and conditions that comes along with the credit card, which reveals how to avoid recurring interest on your charges when you make payment in part or full.

Understand the credit limits

Based on your income, repayment history, spending patterns, CIBIL score and other factors, the lending bank sets the credit limit. This is the maximum amount one can spend on their card. If you use your card beyond this limit, there may be some penalty added.

Learn about reward programme

Every credit card has its own reward programme. Some may start rewarding you with its first swipe for purchase, whereas other credits card may expect you to register first and then earn rewards.

Few cards may earn you rewards on a particular transaction only. Discover your reward programme and use your card accordingly to get maximum benefits from it.

Create auto pay

If you have tendency to forget, then please opt for auto pay for your balance outstanding on your credit card. This would ease your monthly bill payment, by setting up the date and minimum amount due/total amount due towards outstanding. Ensure that you choose the right date to avoid late charges.

One can set up auto pay through the respective credit card issuer or through personal bank account. It is important to pay your dues on time to avoid negative comments in your CIBIL report.

Now that you are familiar with all the aspects of credit card, you can begin to use the same to gain maximum out if it. Enjoy the benefits of credit card in a secured way while spending. The more you know about using a new credit card, the more you reap!

Illustration: Uttam Ghosh/

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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Rajiv Raj