Recently, I had an incident with my friend, which I felt that it is important to share with everyone. It happened that I was sitting with my friend and a message comes on his phone. And he gets shocked when he sees that message. The message comes that your credit card bill due is of 8 lakh rupees.
Now, he gets shocked suddenly because the bill due is of 8 lakhs and according to that credit card, the limit was only 3 lakh rupees. So, how can the bill due to the credit card which is of 3 lakh rupees come to 8 lakh rupees? Then I tell my friend to remember that you have increased the limit and requested. Then he remembers that a phone had come and he said that we can increase your limit. Should we increase it?
And he said yes on the phone. Now, by saying yes on the phone, his limit will be increased so much that he did not even know. So, I told him to do the second thing that now you check the statement that why this bill has come. What has been spent from your credit card? So he checked this statement.
Now, when he checked the statement, he said that I have spent all the expenses. Now, you listen very carefully. My friend was not spending all the expenses, but he was shocked that his bill is of 8 lakhs. Here two things have happened. Number one, the limit that the bank increased, that limit increased so much that my friend could not afford it. Now I will talk about it.
Number two, my friend spent because he felt that he had money and when he was spending, he did not even remember. I will explain to you about this that the spending is happening with fake money. Now I will explain to you why it is fake.
When you spend from your debit card, then the message comes from the bank. You know how much balance is left in your savings account. Whatever anyone has, 2 lakhs, 5 lakhs, 2000, 50000, whatever, you know how much money is left and you spend according to it.
But when you spend through a credit card, now this blog is important for all those who either want to get a credit card made or they are already using a credit card. You think you have money. Many people have not one but three or four credit cards. Some have a limit of 1 lakh, some have 2, some have 3 and you think I have 5 lakhs for emergency.
You don’t have that 5 lakhs. You have a limit sanctioned, you can take a loan and see how the situation is created here. You thought you have money, you spent it’s when my friend was spending 50,000, 1 lakh, 80,000, he was only seeing 80,000 or 1 lakh and he thought I can afford it.
But he did not even think that he would have 8 lakhs in a month. So here, now this example is of 8 lakhs. For that person, it is possible that 50,000 is enough. His limit is 25,000 and the bank has increased the limit of 50,000and if that person’s salary is 25,000 and he cannot afford 50,000, then what will happen? This is where this trap starts.
What do you think that so many offers come on your credit card? Go and watch a movie for free, go to play golf, go and sit in the airport lounge, take cashback of 5,000, take cash back on this, take cash back on mobile. How is the whole bank affording? Because he knows that one day you will get trapped. Now point number one comes from here.
Whenever you have an offer to increase the limit, if the bank offers you that we can increase your limit, first of all, they will increase your limit only when they see that you are spending regularly. If your spending is regular and you are making timely payments, then they will increase your limit. This means that you are a good customer of the bank, but when they increase your limit, you think you have more money, you increase your limit only when your income is increasing.
I am repeating, you increase your limit only when you feel that your income is increasing. If your income is not increasing and you increase your limit, then what will happen in your mind, the psychological factor will be that I have fake money. I have money, but you don’t have it and you will spend it someday.
Your limit will be that you will spend it someday and you will get trapped because the trap starts from here that if you or my friend, my friend somehow paid 8 lakh rupees, but if he could not pay, then the bank charges you a rate of interest of about 40%. Now there are two things here.
If my friend did not have to pay 8 lakh rupees, then the first option was that either he would have paid 8 lakh rupees or he would have paid a minimum due. Many people know that this minimum due is also a trap because you have not paid the money in action. You did not give the 8 lakh rupees that you had to give.
You gave the minimum due. Someone got a bill of 1 lakh, his minimum due came, give me 5,000rupees. So he did not give 1 lakh, he gave 5,000. He thinks he is saved, nothing is left. You have to give back the 1 lakh rupees that you have to give with interest and the interests very high.
It is the average of the industry that credit card companies charge you 40% on an average basis, on a yearly basis, they charge you back the rate of interest. Now if he could not pay that money, then he is offered that youkan also does Ewido EMI, but the rate of interest charged on it is too much. We understood the power of compounding.
We have to use it in our favor. We are investing where we are getting 6%, 12%, 15% and if wearer giving 40% from our pocket, you will get stuck in the trap. So the first trap that comes here is that if the bank offers you that you have to increase the limit, increase it only when your income is increasing. Point number 2, if you have multiple credit cards, then you closet. Why? Because if you have, why do you need a credit card? A credit card is a very good thing if you use it in the right way.
For example, I tell you that my brother now needs pocket money. He has to go somewhere, fill petrol, he has to do anything, he asks for money. I don’t give money. I say that this is my credit card, so keep the credit card with you and go and spends much as you want. Now, what do I mean by whatever I want, I will do it in my limit, but I will get to know about everything.
He should only have 2-4 thousand rupees for cash. Rest, whatever you have to spend, do it with a credit card because if you spend with accredit card, I will get to know about everything. You took your friends to Bikaner or took Domino’s, you went toe hotel, how much petrol did you fill? I have all the data, you are spending in cash, I have no data. I know how much your car is running, how much petrol you are getting for a month.
So all the data comes when spending with a credit card is number-one. Point number 2, whenever spending with a credit card, then what is the second model of earning in the market, suppose my friend had to spend that money, head to do it. Now he has done more or less, that is a different thing, but if he has spent 8 lakhs, then you know wherever he has spent, you want to buy a cloth, you want to buy a mobile, you want to buy anything, the merchant gets a payment by deducting 2%of it.
This means that if there is a payment of 100 rupees, then the merchant will get only 98rupees.2% credit card companies keep with them. Now why will the merchant do their loss? Merchant does not want to do his loss because he thinks that some money is coming.
You went to Zara, you did shopping, so if Zara has the option of a credit card, then money is coming less through the credit card, but money is coming, so they put it in their mind that it is okay, it is not a problem, this is the part of our costing, but if you spend from your credit card, then 2% credit card companies charge and give you back as a reward. Now, whether they give less than 2%, give more, that is a different thing,
but the example is that if he had spent 8 lakhs, then 1% of 8 lakhs is 8000 and2% is 16000, so he has got a reward of 15000-16000 or points or something like this on his credit card, which he would not have got otherwise. So this is the benefit of a credit card that the reward points we get or you get a lot of offers, they are not available on debit cards, UPI payment, or net banking.
You have a lot of options, so you can spend with a credit card, but only when you have money in your debit card. If there is no money in the debit card, then everything is worthless. Now, what was the motive behind writing this blog? First of all, there are a lot of offers coming from banks these days, that first of all, get a credit card made.
Now many people will not have a credit card. You can get a credit card made if you have regular income, especially those who do not have a regular source of income, do not get a credit card made because you will get trapped in a trap someday. Second thing, if you take a credit card and you are not able to pay, then your Sibyl score is affected. Sibyl score has been affected, you must have seen that you can reach Sibyl score up to900, but anyway, your Sibyl score is above 750, which is very good.
The default of the credit card impacts the Cibyl score the most. Your Sibyl score will come down suddenly and if your Sibyl score comes down, then you will take a loan for a house or a car in the future.
You will not get all this, it will be very difficult for you to get it’s the default of the credit card, basically those people dot very quickly that you will go to the mall somewhere, you will go to the airport somewhere, get a credit card made, people will follow you. Somehow your credit card will be made, but if it is made and you do not have regular income, you do not have stable income, then you will get stuck in a problem someday.
Point number one. Secondly, those people who are thinking that we should get it made, you only get it made when you are psychologically prepared. You do not have money, do not think that if a credit card is made, then I have money.
It is just an additional instrument; you should know how to use it. And third, if banks offer you for a limit, then if your incomes increasing, then only increase the limit. Otherwise, refuse that I don’t want to increase the limit. Sometime sit is good to say no.