Blog #Allahabad Bank Credit Card

Credits cards have several benefits if used correctly and responsibly however, the wrong usage of credit cards can lead the cardholder into a debt trap.

 The wrong usage of a credit card involves - 

1. Paying the only minimum amount due - Banks and financial institutions allow the option to cardholders of only paying the minimum amount. However, this leads to an increase in the balance to be paid, on which a high rate of interest is charged, and makes it difficult for the cardholder to repay the credit card amount.
   
   
2. Utilization rate over 30% - Cardholders are advised to maintain their spending under 30% of the credit limit. If they spend more than 30% every month it could lead them into a debt trap.
   
   
3. Using credit cards for daily use - Using a credit card for daily use can be very harmful as it increases the amount owed by an individual and it can be difficult to repay this amount in the loner amount. Allahabad Bank credit card should be only be used in emergencies.
   
   
4. Not collecting rewards - Users get rewards points for using a credit card. These rewards can be used to get cashback, vouchers, or even discounts on various goods and services. These rewards may have an expiry date and the user could lose out on these benefits.
   
   
5. Making cash withdrawals - Making cash withdrawals through credit cards leads to various additional hefty charges every day until the cardholder makes the repayment. This could lead the cardholder into debt.
   
   
6. Making late payments - Making irregular repayments of the due credit card bills could lead to a negative impact on the credit score of the cardholder which would affect their future credit limits as well eligibility to avail of loans.
   
   
7. Not using interest-free periods - Banks and financial institutions provide a grace period of 20-50 days, in which no interest is charged on the borrowed amount. Not repaying the due amount in this period could lead to high-interest rates charged on this due amount.
   
   
8. Using a credit card to pay hospital expenses - Hospital expenses and medical bills can be very expensive, even if one has medical insurance. Using a credit card to pay such large amounts could lead the borrower into debt in the longer run.
   
   
9. Ignoring bill statements - Some individuals do not open their monthly bill statements because they already owe a large amount. However, this could lead to them missing important information such as due dates, changes in credit terms, a higher rate of interest.
   
   
10. Pursuing rewards - Although availing rewards are useful for discounts and cashback, their value is much lesser than the payments one would make using a credit card. Some individuals make more payments using a credit card thinking they will avail themselves more rewards, this is not advisable at all.
    
    
11. Closing credit cards in haste - Credit cards should not be closed in haste as it has a direct negative impact on the cardholder’s credit score. It affects the utilization ratio extended and reduces the age of the accounts held by you.
    
    
12. Applying for multiple credit cards - Applying for multiple credit cards can lead to not only a reduction in credit score but it can also lead to an eventual debt trap as repayment abilities can be affected.
    
    
13. Not knowing terms and conditions - Cardholders may remain ignorant about the terms and conditions associated with their credit card. It contains important information regarding the actions taken by the banks in case of delayed repayments, etc.
    
    
14.  Carrying balance - Many credit card users are under the impression that carrying their due balance into the next billing cycle could help their credit cycle. However, it does the opposite and also leads to a higher rate of interest charged.

Also read this: Benefits of availing a Loan on a Used Car 

The credit card is a miniature loan that provides you with a fixed credit balance for a set period of time and allows you to use the amount for a variety of reasons while using the card. You must pay your credit card balance on or before the due date. There is no penalty on your bills until you pay your bill on time. This feature makes it less expensive than obtaining a loan. 

However, if you fail to pay by the due date or pay just the full amount outstanding, the credit card issuer will charge you the interest rate or penalize you. To qualify for a credit card, one must first understand the eligibility requirements. A  flurry of credit card applicants arrives at banks on a daily basis because of lucrative discounts, loyalty points, cashback, surcharge waivers, and even more.

Credit Card Eligibility Calculator -

One’s eligibility for using a credit card depends on factors such as income, credibility/credit limit, and age. Among the factors mentioned, income plays a vital role in determining a person’s credibility and plays an important role in determining the credit limit to be sanctioned. 

There are several factors you can check which may affect your eligibility to use a credit card -

Age :

Applicant’s age is an important factor in deciding your eligibility. The legal minimum age must be at least 18 years old. If you are under the age of 21 and want to take the card yourself, you must have a stable income or a second co-signer who can pay all the expenses of the card account. The first factor to consider when determining eligibility is age. 

Specify the credit limit :

This limit is set by a credit card company. To get a credit card, you need to have a stable source of income. In addition, the income standards of the different cards you apply for may be different. Some cards require a person to earn a certain amount of salary. If the card is held by a minor, the co-signer must have a permanent income. This enables you to pay the bill for the purchased goods. Even if you choose to have a secured credit card, obtaining a regular and stable income is crucial as eligibility for the program. 

You must have proof of fixed deposit of a certain value which you might have to show as a guarantee. You can more easily obtain credit card authorization from the lender. The credit report is the basis for obtaining the card for yourself. This is usually based on factors such as the number of cards you currently have, total cards you owe, any previous loans, payment history, outstanding payments, bankruptcy expenses, etc.

Credit score :

To get a credit card with bad or no credit, you need to use a secured credit card. The credit card company will use the money as collateral before providing you with the card and use the money if the cardholder fails to make repayments of dues.

Reduce past debt :

Any past outstanding debt can reduce your chances of obtaining a credit card. As you know, a credit card is a type of loan that a company takes and expects the repayment in the specified period. Past debts can become an obstacle to pay for newly withdrawn credit cards. This becomes a risk factor for lenders because borrowers may have difficulty returning the money and become debtors. When the amount of debt is high, the chance of owning your credit card decreases.

Co-signature :

If you are too young to qualify for a loan or have no income to pay your bills, you need to co-sign. When they receive a credit card to repay bad debts, they will also ask for a co-signer. If you do not pay, he/she(co-signer) will be responsible for paying your Credit card bill. You are also responsible for paying the balance amount. Allahabad Bank's credit card approval rate is the fastest in comparison to other lenders or other banks.

Read More About:- Factors to think before availing a Car Loan