HappyRupee

07/12/2016

Sweet Poison - Credit Card Min Amount Due

Credit cards are the best thing that has happened to a grown up. You get a job and you get half a dozen credit cards offered to you. Credit card companies just love you.

Swipe all you want - and convert the big purchases to EMI easily. And just pay the minimum due every month. The credit card folks don't bother you to pay more than that, so why should you bother. These credit cards are just so good.

So good to be true! That's right - just pay your Minimum Amount Due and you will find after several months that your credit card balance is just not reducing. What's gone wrong???

Simple math buddy: Minimum Amount Due is usually 5% of your credit card outstanding. This goes to first pay your interest – which usually is 3.5% of your credit card outstanding. So only 1.5% goes to reduce your credit card outstanding!

Takeaway #1: It would take 5.5 years to repay your credit card outstanding (100%/1.5% per month =67 months).

Takeaway #2: You would have paid 230% of your credit card outstanding as interest in that 5.5 years.

Ouch - that does not feel good. Now you know why credit card companies don’t push you to pay the entire amount when due.

Some cards do tell this sad story – but at the end of the statement in the part that you don’t read. My Standard Chartered Card says this “If you spend Rs 10,000 and pay back exactly the Minimum Amount Due every month, it will take approximately 6.5 years to pay back the complete amount.”

And it does not end there - as you approach your credit card limit, your CIBIL score starts going down. Cross the credit limit, your CIBIL score starts cracking. Plus you start paying over limit fees. Small amounts of Rs 500 per month (that's about 2% of credit card balance of Rs 25,000) but over a year its Rs 6,000. Not a small amount for fees. Plus you pay service tax and the cesses on the tax.

These are time bombs in your wallet - stretch your cards for a bit longer and you will find that you won't get a personal loan easily as your credit score is not what banks like it to be (below 725).

You learn this the hard way - just when you need money for a wedding in the family or you need to buy a house. That's when you go to a bank for a loan and that’s when you know the damage done to your credit score.

Long story short - what your grand-dad or grand-mom would have told you long long ago:

Don't spend more than you can afford
Even if you do, don’t borrow
Even if you borrow, don’t borrow at high interest rates
If you have already spent or you need to spend - don't keep the balance on your credit card for long. Credit cards are great for convenience but not for funding your costs for a long period. Swipe your card for big payments but repay the balance quickly with cheaper cost debt or loan. EMI based loans are the best way to close your card balances. EMIs make you disciplined to pay every month. And then you can watch your CIBIL score move up. Moves up slowly but surely.

Paying only the Minimum Amount Due is a sweet poison – don’t get killed by it!

**************************

Blog #1 of Home Remedies for Healthy Finances. More to follow.

Written by Kalyan Nagururu, IIM-Ahmedabad

01/12/2016

HappyRupee - Loans in 24 Hours.

24/11/2016

Happy Rupee - Loans in 24 Hours

22/11/2016

HappyRupee - Loans in 24Hours

21/11/2016

HappyRupee - Loans in 24 Hours

Sweet Poison - Credit Card Min Amount Due

Credit cards are the best thing that has happened to a grown up. You get a job and you get half a dozen credit cards offered to you. Credit card companies just love you.

Swipe all you want - and convert the big purchases to EMI easily. And just pay the minimum due every month. The credit card folks don't bother you to pay more than that, so why should you bother. These credit cards are just so good.

So good to be true! That's right - just pay your Minimum Amount Due and you will find after several months that your credit card balance is just not reducing. What's gone wrong???

Simple math buddy: Minimum Amount Due is usually 5% of your credit card outstanding. This goes to first pay your interest – which usually is 3.5% of your credit card outstanding. So only 1.5% goes to reduce your credit card outstanding!

Takeaway #1: It would take 5.5 years to repay your credit card outstanding (100%/1.5% per month =67 months).

Takeaway #2: You would have paid 230% of your credit card outstanding as interest in that 5.5 years.

Ouch - that does not feel good. Now you know why credit card companies don’t push you to pay the entire amount when due.

Some cards do tell this sad story – but at the end of the statement in the part that you don’t read. My Standard Chartered Card says this “If you spend Rs 10,000 and pay back exactly the Minimum Amount Due every month, it will take approximately 6.5 years to pay back the complete amount.”

And it does not end there - as you approach your credit card limit, your CIBIL score starts going down. Cross the credit limit, your CIBIL score starts cracking. Plus you start paying over limit fees. Small amounts of Rs 500 per month (that's about 2% of credit card balance of Rs 25,000) but over a year its Rs 6,000. Not a small amount for fees. Plus you pay service tax and the cesses on the tax.

These are time bombs in your wallet - stretch your cards for a bit longer and you will find that you won't get a personal loan easily as your credit score is not what banks like it to be (below 725).

You learn this the hard way - just when you need money for a wedding in the family or you need to buy a house. That's when you go to a bank for a loan and that’s when you know the damage done to your credit score.

Long story short - what your grand-dad or grand-mom would have told you long long ago:

Don't spend more than you can afford
Even if you do, don’t borrow
Even if you borrow, don’t borrow at high interest rates
If you have already spent or you need to spend - don't keep the balance on your credit card for long. Credit cards are great for convenience but not for funding your costs for a long period. Swipe your card for big payments but repay the balance quickly with cheaper cost debt or loan. EMI based loans are the best way to close your card balances. EMIs make you disciplined to pay every month. And then you can watch your CIBIL score move up. Moves up slowly but surely.

Paying only the Minimum Amount Due is a sweet poison – don’t get killed by it!

**************************

Blog #1 of Home Remedies for Healthy Finances. More to follow.

Written by Kalyan Nagururu, IIM-Ahmedabad

14/11/2016

Sweet Poison - Credit Card Min Amount Due

Credit cards are the best thing that has happened to a grown up. You get a job and you get half a dozen credit cards offered to you. Credit card companies just love you.

Swipe all you want - and convert the big purchases to EMI easily. And just pay the minimum due every month. The credit card folks don't bother you to pay more than that, so why should you bother. These credit cards are just so good.

So good to be true! That's right - just pay your Minimum Amount Due and you will find after several months that your credit card balance is just not reducing. What's gone wrong???

Simple math buddy: Minimum Amount Due is usually 5% of your credit card outstanding. This goes to first pay your interest – which usually is 3.5% of your credit card outstanding. So only 1.5% goes to reduce your credit card outstanding!

Takeaway #1: It would take 5.5 years to repay your credit card outstanding (100%/1.5% per month =67 months).

Takeaway #2: You would have paid 230% of your credit card outstanding as interest in that 5.5 years.

Ouch - that does not feel good. Now you know why credit card companies don’t push you to pay the entire amount when due.

Some cards do tell this sad story – but at the end of the statement in the part that you don’t read. My Standard Chartered Card says this “If you spend Rs 10,000 and pay back exactly the Minimum Amount Due every month, it will take approximately 6.5 years to pay back the complete amount.”

And it does not end there - as you approach your credit card limit, your CIBIL score starts going down. Cross the credit limit, your CIBIL score starts cracking. Plus you start paying over limit fees. Small amounts of Rs 500 per month (that's about 2% of credit card balance of Rs 25,000) but over a year its Rs 6,000. Not a small amount for fees. Plus you pay service tax and the cesses on the tax.

These are time bombs in your wallet - stretch your cards for a bit longer and you will find that you won't get a personal loan easily as your credit score is not what banks like it to be (below 725).

You learn this the hard way - just when you need money for a wedding in the family or you need to buy a house. That's when you go to a bank for a loan and that’s when you know the damage done to your credit score.

Long story short - what your grand-dad or grand-mom would have told you long long ago:

Don't spend more than you can afford
Even if you do, don’t borrow
Even if you borrow, don’t borrow at high interest rates
If you have already spent or you need to spend - don't keep the balance on your credit card for long. Credit cards are great for convenience but not for funding your costs for a long period. Swipe your card for big payments but repay the balance quickly with cheaper cost debt or loan. EMI based loans are the best way to close your card balances. EMIs make you disciplined to pay every month. And then you can watch your CIBIL score move up. Moves up slowly but surely.

Paying only the Minimum Amount Due is a sweet poison – don’t get killed by it!

**************************

Blog #1 of Home Remedies for Healthy Finances. More to follow.

Written by Kalyan Nagururu, IIM-Ahmedabad

10/11/2016

CIBIL score - know what's going behind it to stay ahead

10th class grade, engineering entrance score, GMAT n GRE score - you thought these mattered most in life. Yes - they do till you get the job you want. But after that - the score that matters most for the rest of your life - is your credit score / CIBIL* score. For an urban life - you need a personal loan for a wedding or a holiday, a few credit cards and an auto loan and a housing loan. And all those banks and finance companies look at your score.

Some facts you need to know:

1. All banks and finance companies (NBFCs) will report monthly to CIBIL (and other credit bureaux) on your payments track record

2. CIBIL has been in place for about 15 years. So if you had a credit card or loan even way back - its history is in the database. And most don't know this - even your enquiries are being tracked.

Now, let's look at how CIBIL score can go down and hit your financial life:

A. Banks will not mention this clearly but most of them have a minimum score (between 725-750), below which they will not give you a loan or credit card easily. If it's 800 or above - you definitely are rocking !

B. A bit funny - if you don't have any credit history, some banks won't give personal loans for high amounts. So those who did not borrow in the past are considered bad! Having atleast one credit card helps a lot in building a score. Usually it takes about 6-12 months of credit card usage to get a score. Of course, you need to be prompt on your card payments.

C. Delayed payments get captured with days of delay also. So if you pay your credit card dues after due date, it is being captured in your credit report. Which means pls remember to pay your dues on time !

D. Your recent credit history matters a lot. If you had overdues or write-offs sometime back but have been prompt recently, it will still take about 3 years to get back to a good score. There is a very high penalty/negative marking for bad behavior.

E. Never never cross your credit card limit - it gets reported even though you may have paid on time. Ideally change your credit limit. Even if you hang around close to your credit limit, your score starts falling down. Even if the credit limit is a fraction of your annual salary. Sounds like stupid logic - but its real and can hurt you.

F. If you need a loan or a credit card, don't make more than 3 enquiries. More enquiries affect your score and sometimes banks don't lend if you have too many recent enquiries. If you get a phone call from a card or loan agent - ensure that you are not authorising an enquiry check without being informed.

G. For those with a low score - the best way to get back your score is to show a good track record of payment. So take a loan that's easy to get - for small amounts or a consumer loan. And pay them on time. It's not a quick fix but a wise way to fix.

H. If you ever paid less than what was due, what you didn't pay is shown as 'settled' even if the bank/credit card company agreed. And that's not good for getting a new loan. Ensure that the unpaid amount is waived or removed from your CIBIL report.

Do check your CIBIL report- including the credit information history and go through it carefully. If something is wrong you can complaint to the bank/finance company to rectify.

RBI just announced that every customer should get one free report every year. Just go and check yours once they are available on CIBIL (likely soon).

Score well !

*(CIBIL is India's oldest, largest and most popular credit bureau with banks & financial institutions. So we will stick to CIBIL score in our discussion.)

Blog #2 of Home Remedies for Healthy Finances. More to follow.

09/11/2016

Sweet Poison - Credit Card Min Amount Due

Credit cards are the best thing that has happened to a grown up. You get a job and you get half a dozen credit cards offered to you. Credit card companies just love you.

Swipe all you want - and convert the big purchases to EMI easily. And just pay the minimum due every month. The credit card folks don't bother you to pay more than that, so why should you bother. These credit cards are just so good.

So good to be true! That's right - just pay your Minimum Amount Due and you will find after several months that your credit card balance is just not reducing. What's gone wrong???

Simple math buddy: Minimum Amount Due is usually 5% of your credit card outstanding. This goes to first pay your interest – which usually is 3.5% of your credit card outstanding. So only 1.5% goes to reduce your credit card outstanding!

Takeaway #1: It would take 5.5 years to repay your credit card outstanding (100%/1.5% per month =67 months).

Takeaway #2: You would have paid 230% of your credit card outstanding as interest in that 5.5 years.

Ouch - that does not feel good. Now you know why credit card companies don’t push you to pay the entire amount when due.

Some cards do tell this sad story – but at the end of the statement in the part that you don’t read. My Standard Chartered Card says this “If you spend Rs 10,000 and pay back exactly the Minimum Amount Due every month, it will take approximately 6.5 years to pay back the complete amount.”

And it does not end there - as you approach your credit card limit, your CIBIL score starts going down. Cross the credit limit, your CIBIL score starts cracking. Plus you start paying over limit fees. Small amounts of Rs 500 per month (that's about 2% of credit card balance of Rs 25,000) but over a year its Rs 6,000. Not a small amount for fees. Plus you pay service tax and the cesses on the tax.

These are time bombs in your wallet - stretch your cards for a bit longer and you will find that you won't get a personal loan easily as your credit score is not what banks like it to be (below 725).

You learn this the hard way - just when you need money for a wedding in the family or you need to buy a house. That's when you go to a bank for a loan and that’s when you know the damage done to your credit score.

Long story short - what your grand-dad or grand-mom would have told you long long ago:

Don't spend more than you can afford
Even if you do, don’t borrow
Even if you borrow, don’t borrow at high interest rates
If you have already spent or you need to spend - don't keep the balance on your credit card for long. Credit cards are great for convenience but not for funding your costs for a long period. Swipe your card for big payments but repay the balance quickly with cheaper cost debt or loan. EMI based loans are the best way to close your card balances. EMIs make you disciplined to pay every month. And then you can watch your CIBIL score move up. Moves up slowly but surely.

Paying only the Minimum Amount Due is a sweet poison – don’t get killed by it!

**************************

Blog #1 of Home Remedies for Healthy Finances. More to follow.

Written by Kalyan Nagururu, IIM-Ahmedabad

07/11/2016

Happy Rupee is a startup that aims to make borrowing convenient & hassle free -a happy experience!