Misuse makes credit card dangerous

New Delhi: Indians are increasingly using credit cards, but many people do not fully understand the usability of the product. Roopam Asthana of SBI Card Services and Bijon Mishra of Consumer Voice talk about what are the technical aspects of usage and also consumer experiences about credit cards.
Fatima Karan: Hello and welcome to the Swipe Smart, a IBN Money special on credit card. With Indians on a mission to spend, the overall use of plastic money has increased. But do we fully understand the product?
Today, we will be talking about, what are the technical aspects of usage and also consumer experiences. Joining me on the show are Mr Roopam Asthana of SBI Card Services and Mr Bijon Mishra, CEO, Consumer Voice.

The first question is, why use credit cards at all?

Roopam Asthana: Credit card in reality is a payment mechanism. It is meant for the safety, convenience and ease of transacting for a consumer. There is another aspect of credit card, which is really the credit piece on the credit card. And that is supposed to be used to match the short-term cash flow mismatches, which a customer might actually have.
Fatima Karan: Mr Mishra why do you use credit cards?
Bijon Mishra: Credit card is a tool to enhance the purchasing power of the consumer and it facilitates in terms of able to get the additional value of money.
Fatima Karan: How many credit cards should a person ideally have?
Roopam Asthana: Ideally, a person should have only one credit card. Because, the way the system operates, there is very little chance of failure in terms of as far as the transaction is concerned. So, in my opinion, a person should have only one credit card.
Fatima Karan: Buying on credits lead to interest-free purchase. What is this interest-free purchase?
Roopam Asthana: This is a very important question you have asked Fatima. This aspect of credit card is very very unique aspect, which is not available on most of the other products which are available from banks. On a credit card, when you make a purchase and you actually pay a bill in full, at the end of the month when you get the bill, for the entire period for which you borrowed the money from the credit card issuer, you actually do not pay any interest on that borrowing. What happens is that, if you do not pay your bill in full and you pay only in part, then from there on the balance that you carry forward, as well as all future transactions will actually accrue interest.