Buzz
Credit cards are increasingly popular payment tools in our lives, offering the advantage of not always having to carry cash and the ability to spend now and pay later...
However, while using credit cards, Vietnamese cardholders may either be unaware or indifferent to some rather important issues regarding credit cards.
Below are key points that every credit cardholder needs to understand to use credit cards wisely.
3 Key Considerations When Using Credit Cards for Expenses
Avoid spending over half of your credit limit.
Many people consider this advice foolish because they believe 'the bank allows you to spend as much as possible, so you should use it all.' However, credit limits are often several times higher than monthly incomes. Therefore, exceeding monthly income expenditures can lead to financial difficulties for cardholders in the following month (despite potential accumulation from previous months).
Banks often provide a credit score, and a significant factor affecting a cardholder's credit score is the percentage ratio between the average monthly spending of the cardholder and their credit limit. Those with ideal credit scores typically have this ratio around 7%, and those below 20% are considered good. Credit cardholders with spending ratios below 50% of their credit limit are acceptable. However, for those who regularly exceed 50% of their credit limit, their credit scores will not be highly evaluated.
Your credit score directly affects the perks you enjoy when using a credit card. Additionally, it is also one of the factors influencing your future bank loan applications, especially for unsecured loans. Banks will use your credit score to determine the amount you can borrow according to your repayment capabilities. Those with low credit scores will be assessed as having poor financial planning; hence, the amount borrowed will be less, even though their monthly income may be higher than others.
Pay attention to the mechanism of calculating overdue credit card interest rates.
Typically, banks will give you about 15-20 days after the payment due date to spend money with your credit card without interest. This means you have about 45-50 interest-free days to borrow money from the bank.
However, failing to pay overdue credit card bills or only making partial payments will incur additional interest on the outstanding balance. The difference lies precisely in this aspect.
There are currently two types of calculating overdue credit card interest: based on the principal debt and based on the remaining balance.
- For calculating interest based on the remaining balance:
Domestic bank credit cards like Vietcombank, Vietinbank, BIDV... usually calculate overdue interest based on the remaining balance (meaning if you spend 5 million VND using your credit card but only repay 3 million VND, the interest will only be calculated on the remaining 2 million VND you owe).
- For calculating interest based on the principal debt:
This means even if you have repaid 4.9 million VND and still have 100,000 VND outstanding on the due date, the interest will be calculated on the 5 million VND you spent using the credit card.
With this method, cardholders will incur very high fees for overdue debts. Banks that apply interest calculations based on the principal debt are usually foreign bank credit cards such as ANZ credit cards, HSBC credit cards...
Therefore, you need to pay close attention to understand the interest calculation method, thereby making appropriate repayment plans. It's best not to let overdue debts occur.
Withdrawing cash using a credit card
Although credit cards can withdraw cash from ATMs, cardholders need to be very mindful of the relatively high cash withdrawal fees, typically calculated at 4% of the total amount withdrawn. Therefore, cash withdrawals should be minimized.
Many people use credit cards for payments, spending on all purchased goods and services, which can be very convenient but also come with many disadvantages such as the risk of card exposure, leading to misuse by fraudsters if you swipe your card at untrustworthy locations, and additional fees when using the card for cash withdrawals or payments...
Therefore, experts advise credit card users to only use credit cards for purchasing goods and services that offer discounts, promotions... and to use cards only at reputable retail outlets.
Hopefully, with the information above, you have gained valuable experience in using credit cards wisely and responsibly.
See more Credit Score - an essential factor that credit cardholders cannot overlook
Mytour.vn - The first price comparison website in Vietnam
Find the cheapest products in Vietnam
O.N
