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Correct option is A - When you use your credit card you can swipe it to the extent of the available credit limit, which is the total credit limit minus any outstanding balance or pending charges on your credit card. To explain further, when you start using your credit card, your total credit limit is the same as your available credit limit. As you use your card, your available credit limit decreases until it becomes zero. Then it gets restored to the same limit as your total credit limit once you pay off all your outstanding balances and pending charges. Your total credit limit can be increased only by your bank or credit card provider.
Correct option is A - Ideally you should use your credit card limit only to 30% of the total credit limit. This ratio is called the credit utilisation ratio. If the credit utilisation ratio is high, it could hurt your credit scores as you could be seen as a high-risk borrower. If your credit card spends do exceed 30% of the total credit limit, then paying off the outstanding in small amounts during the credit card cycle can help bring down the credit utilisation ratio and keep your credit score high.
Correct option is B - It is best to pay your total credit card outstanding off the total outstanding amount every month. This will ensure your credit score stays high and your credit card does not accumulate high interest rate charges. The minimum amount is a percentage of the total amount (5% of the total outstanding) that you must pay to avoid a negative credit score and to keep your credit card active. Any unpaid amount gets carried forward to the next month. This, in turn, leads to high interest charges on the balance amount and a reduction in your available credit limit. It could also lead to ballooning of debt if you are not careful.
Correct option is A - If you are unable to repay your credit card dues in full, it is advisable to convert the transaction into EMIs. This way you can reduce the interest charge. If you carry forward the balance and pay it off as and when it is possible, you will end up paying a higher interest charge on the overdue plus penalty on late payment.
Correct option is C - When you convert a credit card transaction into EMI you have to pay interest rate, GST and processing fees. Both the interest rate and processing fees will vary based on the number of EMIs you select. Sometimes banks may waive the processing fees. This happens if there is an offer on the card, as it happens during the festival season.
Correct option is A - You can pay your credit card due, either in part or in full, before the due date. Unlike the repayment of a personal loan, there is no penalty for clearing your credit card balance before the due date. In fact, doing so will free up your available credit card limit and you will be able to again use your credit card to the full credit limit if you need to. So, it is good practice to pay off your credit card due in advance, if you can afford to.
Correct option is B - There is no minimum amount for using credit cards. You can use your credit card for any amount – big or small, as long as it is within the available credit limit. The only condition is that the merchant or e-commerce platform where you are using the credit card should allow it.
Correct option is B - If you have multiple credit cards it may become difficult for you to keep track of the billing cycle, due date, and payment for each of them. You may miss payments and end up paying a late payment penalty. This will, in turn, impact your credit score. So, ideally have only two or three credit cards and manage them well by paying off your dues on time.
Correct option is A - If you use a credit card regularly and pay off your credit card dues on time, it will have a positive impact on your credit score. Your credit repayment history contributes in a significant way to pushing up your credit score and building a good credit history. Hence, using a credit card is an easy way to improve your credit score. But on the other hand, if you default on your repayments or utilize your credit limit to the full every month, this will bring down your credit score. Hence, use your credit card smartly
Correct option is C - If you make a partial payment of your credit card transaction, then the interest rate is charged on the full outstanding amount from the date of the transaction till the payment date and on the remaining amount date from the partial payment date till the next statement is generated. This is if you make the part payment before the due date. If you make part payment after the due date, then in addition to this interest you have to pay a late payment penalty as well.
Correct option is A - You can use your credit card even if you have not paid your dues in full, till you reach your total credit limit. But you will be charged an interest rate, plus if you have not even paid your minimum amount due (MAD), a late payment penalty will be charged on the total amount due (TAD). This gets carried forward every month and gets added to the new transactions you carry out.
Correct option is A - If your bank is offering a higher credit limit on your credit card, it is because they value you as a credit card customer. You are using your credit card and repaying it regularly, without default or delay in payments. Or you are a salary account holder in the same bank and your salary has recently increased. In any case, you should accept the higher credit limit because this will help improve your credit utilisation ratio. The higher your credit utilization ratio, the better it is for your credit score. Also, a higher credit limit means you have a higher amount available to use in case of an emergency.
Correct option is B - Having an add-on credit card does not mean an increase in your credit limit. The credit limit will be distributed between the primary card and the add-on card or cards. This could be either decided by your credit card provider or in some cases you, as the primary credit cardholder, may be allowed to fix the credit limit for your add-on cards.
Correct option is B - It is not advisable to take a loan on your credit card because you may end up paying higher interest rates than say, a personal loan. Also, the amount you can borrow will be limited to your credit limit. The only advantage is that such a loan is usually pre-approved and no documentation is required since you being a credit cardholder, are already a customer of the bank and your KYC and other formalities are in place. Hence, take a loan only if you are in dire need of money.
Correct option is B - Merely using your card does not attract any interest charge. It is possible to use a credit card without paying any interest charges ever by paying off the entire outstanding in full every month. If you use your credit card at the start of your credit card cycle, you can get a credit-free period of up to 45 days till the end of the credit cycle to make the payment. This gives you ample time to arrange for funds to pay off your dues in full.
Correct option is B - You don’t have to make the payment if you are sure the transaction is fraudulent and you can prove that it is not done by you. You can raise the complaint and wait for it to be resolved. If it is proven that you have not done the transaction you don’t need to make the payment. But if it is proven otherwise, you will have to make the payment, along with late payment fees and interest rate charges. Hence, it is advisable to make the payment because the bank will reverse if the transaction is proven to be fraudulent.
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