The credit card is the most convenient payment method. Its ease of use is its advantage and it is also the disadvantage of using it. Its benefits can be enjoyed if you follow a few rules and understand what goes on behind the scenes of its use. Let’s begin.
Your credit card limit and risk rating:
Just as the fluttering of a butterfly’s wings at one end of the world can cause a storm at the other, improper use of one credit card transaction can affect your overall standing in the eyes of your bank. Why? In order to understand this, we must understand how the banking system relates to the provision of credit to the customer and to the so-called “customer risk rating.” When the bank examines the extent to which it risks extending credit to the customer, the bank examines the customer’s situation in a comprehensive manner. It’s called obligo – all obligations of the client. The obligo includes:
- The credit facility in the current account (current account).
- Credit card limit.
- The balance of the amounts that have not yet been repaid by the customer as part of loans taken from the bank.
The aggregate sum of these three elements is the customer’s obligo.
Although the perspective is comprehensive, even deviation from one of the frameworks can affect the bank’s view of the customer’s ability to meet its obligations. In other words, deviating from one of the frameworks increases the customer’s risk rating.
Important information:
- each card transaction; Bank credit (even if made in installments) is immediately reflected in the customer’s obligo. In other words, even though only one payment fell in a given month, the total amount of the transaction is what is reflected in the framework.
- The Bank also considers the nonbank charges charged to the account, and they are taken into account when examining the considerations of providing credit to the customer.
- It is advisable to coordinate with the bank that the credit cards will be charged after the date of receipt of salary or income, so that the charges will arrive after the income and not before. Even a temporary deviation of several days – is undesirable.
Credit cards and housekeeping: Do they both go together?
Sometimes, when it is difficult to control expenses and purchases or in times of financial distress, it is better to manage without a credit card at all. You can cancel your credit card for a certain period and use cash. The use of cash does require advance organization but allows for better control over expenses.
A credit card is a very convenient, easy and readily available payment method to use. Sometimes, this advantage can turn into a disadvantage. Those who buy with a credit card do not always feel that they are actually spending money. Many customers find themselves surprised by the monthly billing date. From purchases they themselves made not long before.
Caution: Credit Card Payments
Credit card payments are a loan for all intents and purposes, so it is important to note:
- When installment purchases become a regular practice, small amounts add up to large ones that are difficult to pay on maturity. Pay attention to the cumulative amount and whether you will be able to meet it.
- If you make an installment transaction, you should find out in advance whether there is an interest charge on the payments. By the way, even when it comes to an interest-free payment transaction – you will still pay a deferred payment fee of about half a shekel.
- You can ask the credit card company to receive an SMS to your mobile phone when making purchases over NIS 500, this reduces the possibility of theft. It is also possible to request that a notification be sent if more than 80% of the credit limit has been utilized. Please check whether the service is provided free of charge.
- It is recommended to self-register and check daily how much money we purchased and what the credit balance is. For this purpose, it is possible to use the registration of transactions on the credit card company’s website and compare it against the self-registration. The same is true of current account activity.
- You pay this month for what you consume this month – do not buy regular purchases such as supermarket purchases in installments, but use the payments only for large and planned purchases (refrigerator, washing machine, etc.), payment for car insurance, etc.
- Credit cards are vulnerable to fraud and fraud. Do not give the card to others, and certainly do not give the PIN code to others. If you make a purchase online, make sure the site is secure. Do your senses direct you to the fact that this is a shady deal? Listen to them.
Beware of temptations
- Usually, the customer wins points, stars and other gifts for purchases he makes on his credit card. Many times the utilization of these “rewards” is contingent on additional purchases so that we spend more money in order to redeem a “gift”. Check carefully every time whether it is a benefit or a call to purchase.
- The proliferation of credit cards is a sick evil that does not allow responsible conduct and makes it difficult to control. It is not recommended for a family to have more than 4 cards, two for each spouse, one in a wallet and one in a hiding place at home. If possible, settle for less.
- Although purchases are made on both credit cards and decrease “only at the end of the month”, it is highly recommended to keep a joint record in one list, of both spouses’ expenses,
- Benefits and loans? Caution. Not every “membership club” provides free benefits and loans at good interest rates, check carefully what “friends” mean.
- Cash withdrawal fees on non-bank devices (kiosks, etc.) cost a lot of money, be sure to only take cash out of bank ATMs.
And above all, the ancient Latin rule must be applied: Caveat Emptor – “Beware of the buyer”…
