Credit Card Companies earn their revenues by charging the cardholders for the services provided to them.
Card companies are satisfied if their customers have a good credit rating, but are not happy when the full balance on the card is settled every month.
In such cases, they lose their opportunity to earn interest from the customer.
They usually waive the interest if the balance is fully paid in each month, but will charge full interest on the entire outstanding balance from the date of purchase, if the total balance is not settled.
With the increasing usage of a credit card, millions of people are becoming slaves to hidden fees, compounding interest rates and non-transparent terms and conditions.
A smart customer will avoid falling into these financial traps.
Always read the information provided by the Card Company and ensure that you have fully understood the terms and conditions of credit.
Make sure to check out the credit card bill for any errors or wrong charges appearing in the statement.
Very often, the companies arbitrarily change the terms of the card agreements without giving sufficient notice to the customer.
This practice on the part of the Card Company may affect your credit rating.
Try to avoid delaying the payment of the credit card bill.
You may have to pay late payment fees, which in turn will show a large balance in your account.
This may result in the Card Issuer hiking the interest rate.
Interest rates for the initial period of 6 to 12 months may be as low as 0%.
This rate changes to the regular interest rate after a few months and may be as high as 40%.
Outstanding balance carried forward every month means paying more than you should for the purchases.
If the payment is settled within the grace period, there is no increase in interest rate and you can maintain a good credit rating.
If this practice is not followed, it may lead to accumulation of debt and deep financial crisis at some point of time.
This will adversely affect the individual's credit rating.