5 Tips On Managing Your Credit Cards
It is a challenge to have a credit card with no interest, especially if you live in a region that does not have a Shariah bank that provides a credit card based on Islamic principles. On the other hand, transactions completed with credit cards make cardholders feel more comfortable as it is a substitute of cash and preferred over carrying a lot of cash or cheques. Credit cards are also used for online transactions, for paying monthly bills such as electricity, water, phone, and TV subscriptions.
Before we learn tips on using credit cards, it is good to know the basics of what credit cards are and how transactions are processed behind the scenes. As a former banking practitioner and part of a teaching team in a private educational agency that worked in cooperation with local banks, I learned the ins and outs of the banking business (including credit cards) and how to manage one wisely.
What is a Credit Card?
It is a card made of plastic that is issued by a bank or association in cooperation with banks (such as VisaCard, MasterCard, American Express, Diners Club, Discover Card, Japan Credit Bureau, etc) and customers use it to facilitate payment of sales and purchases of goods or services.
A credit card issuing bank is called an Issuer Bank and it guarantees its customers by providing loans up to a certain limit to its customer, called a Card Holder, to purchase goods/services or for making cash withdrawals with the terms and conditions agreed upon by each party. While a Bank that functioned as the manager of merchants as a payee for transactions using credit cards is called an Acquirer Bank.
What is the function of an Association for Credit Cards?
An association does not print your credit card but it is a part of the transactions process between all three parties: the Issuer Bank, Card Holder, and Acquirer Bank. An association will also protect the three parties by formulating the regulations and policies that must be adhered to by each party in every transaction, so that there is no misuse or losses when conducting business.
Furthermore, an association also takes full responsibility in case of any misunderstandings among the three parties and will decide how to solve them based on the procedures that they have agreed upon. It shall monitor in detail all traffic of transactions within the system and the rules they agreed upon will be continuously improved in accordance with the current situation and conditions.
Is it safe to make transactions using Credit Cards?
Credit cards issued by the issuing bank must already be fully protected by the system and that system is increasingly sophisticated in the banking world. Each card owned by a card holder has been adjusted to match the cardholders’ data which is sheltered in the magnetic stripe (black line behind the card) and the chip located on the front of the card. Therefore, its security is guaranteed with secret codes that are unique for each card. Moreover, when there is a misuse of a credit card, it should be immediately reported to the Issuer Bank for investigation and further action in accordance with the applicable regulations.
Wise tips in managing a Credit Card
Some people have experienced a heavy burden when their credit card payments became due and exceeded their monthly income. Based on that, I’ve realized that we should be more careful and wise in using Credit Cards. Learning from experience is the best teacher in life. I am sure there are many people who have the same experience when enjoying one or more credit cards in the beginning, but ending up with many bills due afterwards. Not to mention the soaring interest rates and other charges imposed upon card holders.
There are 5 tips to avoid pitfalls and to get benefits in using a credit card:
- Issuer bank of your choice. Select a Credit Card by an Issuer Bank that you trust and feel comfortable with. Look for quality service commitment to keeping your savings safe and for providing easy communication with the Bank. Register yourself on the website so you can check your bank directly through online services even if you receive a billing statement via post. Do this so that you can report problems immediately to customer care in the event of the things that make you feel uncomfortable.
- Pay in full the total of your monthly bill. This is to avoid further problems that may occur. This is also one of the tips provided when we are forced to use a credit card instead of shariah card. Make sure your payments are on time and are in conformity with the current amount of your bill (already Zero Balance). Make sure also that you have deposited the inter-bank transfer fees charged to your next bill.
- Always remember the date of your monthly bill. It is very important to note your statement date (the date that the statement is printed by the bank), the due date (the date for which your payment is due), and the grace period (the time during which you are permitted to pay your credit card bill without having to pay interest). If you remember the statement date, it is better if you do transactions after the statement date so you have more time to pay because the transaction will appear on your next billing cycle.
- Transactions abroad. If you have plans for traveling abroad you should contact your bank and ask in advance about fees that will be charged in dealings with foreign currency in the countries. Furthermore, with reporting to the Bank about your traveling plans, they can protect you from becoming a victim of credit card fraud.
- Get your benefits. Don’t indiscriminate in receiving bids that will be charged on your credit card bill, just say “No, Thanks.” You can take advantage of promotions in collaboration with a Merchant Bank that can provide lucrative rewards for you. For example, discounts on some merchants cooperate with your bank issuer.
Finally, some Wise Words about Credit Card:
“Like any other business, credit card companies are out to make money. Unfortunately, their tactics often involve creating rules that take advantage of consumers. Don’t use your cards blindly. Learn about additional fees you may incur, and pay your balance off each month to avoid interest. Take advantage of any perks you can to be sure your credit cards are acting as the valuable financial tools they should be.” (moneycrashers.com).