Cost of credit

Cost of credit

New Delhi: Is your credit card debt eating into your income? Is it safe to shop online with a credit card? Talking about the pitfalls of maintaining credit cards, co-founders of iTrust Financial, advisors Dhruv Agarwala and Kartik Varma say credit cards have to be managed carefully in order to gain their benefits.

Click here to watch video

/Content/Videos/2009-05-18/PG2 Videos/1705_Credit Card_disco_MINT_TV.flv7a7ac79c-422a-11de-9d3c-000b5dabf636.flvThe most important thing to do is pay off your monthly payments in full and on time. "Borrowing money on credit cards is one of the most expensive ways of borrowing money," says Agarwala. "You end up paying 3.5% a month as interest, which is about 40% plus per annum.

That’s higher than a personal loan which is 14-16%."

Not paying off your debt every month could amount to a late fee of around Rs250 and an additional 2.5% of the outstanding balance depending on the credit card company.

Shopping online is safe, say the advisors, as long as the site you are buying from has a good reputation and a history of taking electronic payments, like or, for example.

Be sure that you’re not being directed to a phishing site. You can look to see if the site uses ‘Verisign’, which means the site uses a service that provides secure transactions.

Finally, Varma says to be sure not to share your credit card number or pin with anybody, even friends. “We can render ourselves open to abuse if one shares all these details", says Varma.