Ask people whether credit cards are a necessity or a luxury and most people would probably term them a necessity these days. Credit cards are considered a boon for the ready convenience they confer on the user – you don‟t have to worry about carrying enough cash when you go shopping or to a restaurant. Just flash your card, sign and walk out. But there are many who criticize credit cards for the „easy money‟ syndrome they generate. It is true that many people fall into a debt trap, thanks to the extensive use of their cards. But if you‟re careful with your expenses, they can be a handy thing to have around. Hence, you need to consider the term „responsible usage‟ and understand the actual significance of living on credit. Remember that using card does not mean „free‟ credit. In effect, what you are doing is merely postponing payment. While it looks real good to have to pay only one or two thousand a month on your card, remember that you are paying interest on the amount that you „revolve‟ from one billing cycle to the next. But there is one precaution that we should add. Always settle a credit card bill in full for two good reasons. First and foremost, if you are not able to pay up now, you should not have spent it in the first place. Second, the credit charges tend to be extremely high, ranging from 2 per cent to 3 per cent per month. There is no shortage of cards on offer. Almost every bank has launched a card. So the biggest hurdle you face is in trying to choose from amongst them. So, how does one choose among the various cards on offer? “The factors for choosing a card revolve around certain differentiating features that one card may offer and the others don‟t, like acceptability, eligibility, fees, other charges, credit period, cash advance, etc.” Cards which carry the Master or Visa affiliation are more widely accepted across the country compared to Diners and American Express cards. Similarly, global credit cards are valid even outside India. If you travel regularly within or outside India, cards would probably suit you the best, due to their acceptability across various outlets. If your credit card is more of a functional accessory while you shop or entertain in your own town, you will want a higher credit limit. Here, foreign and private banks will give you a higher limit. But if you are a value-for-money person who likes the convenience offered by a card, but will alternate between paying by cash and card, you could consider credit cards offered by the public sector banks. Their entry fees are typically lower. Moreover, if you need them, you get longer credit periods and lower credit charges. But you may not get a very high credit limit. Many of us nowadays carry more than one card, and under the circumstances, you could use them to segregate your expenses. For example, if your employer reimburses you for certain travel and entertainment expenses, it would be good idea to charge all official expenses to one card and all personal expenses to the other card. This will help you account for your official expenses easily. It‟s all very well to be a member of the plastic age. Like all good things in life, a credit card privilege has to be enjoyed. 1.1 On the basis of your reading of the above passage, answer the following questions. a) Credit cards are no more a luxury but ............. these days. b) Why are credit cards considered a boon? c) Many criticise credit cards as .............. . d) Why do people fall into a debt trap? e) What should a person who uses a credit card keep in mind? f) Why should a credit card bill be settled in full? g) What are the factors that guide a person in choosing a card among the various cards on offer? h) How do credit cards offered by the public sector banks help a value-for-money person? i) Identify the word in paragraph 9 that means the same as „special right‟.
Answers
Answer:
a) a necessity
b) They are considered a boon because they confer on the users a ready convenience.
c) they generate easy money syndrome.
d) Many people fall into a debt trap because of the extensive use of their cards.
e) A person who uses a credit card should keep in mind that a credit card does not mean 'Free credit'.
f) A credit card should be settled in full for the following reasons":
1) If you are not able to pay up now, you should not have spent it in the first place.
2) The credit charges tend to be extremely high, ranging from 2 percent to 3 percent per month.
g) Factors that guide a person in choosing a card among the various cards on offer are acceptability, eligibility, fees, other charges, credit period, cash advance, etc.
h) The credit cards offered by the public sector banks help a value-for-money person as their entry fees are typically lower and you get longer credit periods and lower credit charges.
i) Privilege
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