Credit cards used in the right way are liberating tools and are very convenient. But the same may turn out to be a nightmare for clients if not used with caution. This happens most often due to lack of information with regard to its correct usage. It is mandatory to read the terms and conditions before using the card as different cards may have different charges pertaining to it. In spite of being repeatedly reminded card holders don't seem to read the instructions carefully and realize the consequences only when their first credit card billing arrives. Most of the time, it is over and above their estimates.
The most critical information that one needs to be aware of is found in the MITC (Most Important Terms & Conditions) wherein one needs to take a very close look. This can be found on the card's website and any additional information with regard to the finance charges, late payment fees, etc., can be got from the website. There might be interest levied on the overdue amount which is payable to the company and various other charges.
Plastic money can be a boon especially at times when one is short of cash. Cards may be used to withdraw cash at times when the bank balance is insufficient. Although it may be tempting to do so, one needs to exercise caution as cash withdrawals from ATM's are directly charged 2.5% of the amount withdrawn. At such times, the payment is due right from the time of withdrawal and has no grace period like in the case of Point of Sale terminals. Interest rates may vary anywhere between, say around 39% to 45% per annum.
Exceeding the credit limit is another threat posed to the card user, if he/she does not keep track of its usage. One has to bear in mind the spending patterns and avoid over usage of the card as this could attract an extra surcharge if one exceed the credit limit. The overdrawing charges may amount to another 2.5% or 500, the higher one always. Outstation checks when used to pay off credit card bills attract another 1% of the value of the check. This is entirely dependent on the bank's check collection policy.
If the account holder has another account with the bank that has issued the card, and if there is an outstanding on the credit card, the bank can use the funds lying in the other account to clear the outstanding, without the card holder's consent. This is done mostly during non-payment of dues.