To optimize these features while mitigating risks, employing the following strategies ensures prudent and secure Credit Card usage.
Understanding Credit Cards - Common terms associated with Credit Cards
Grasping the jargon associated with Credit Cards is essential for smart usage. Here are some frequently encountered terms:
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Annual Fee: This is an annual charge that Credit Card holders must pay to the bank every year to continue using their card. It's important to pay this fee on time and in full to avoid impacting your credit score and accruing late fees.
For UOB Credit Cards, annual fees vary between VND 700,000 and VND 1,500,000, depending on the card type. -
Payment Due Date: Credit Cards offer a grace period up to 55 days where no interest is charged, allowing consumers to borrow and spend up to their credit limit. The due date is the deadline for cardholders to settle their total dues to avoid interest and fees. This date can be found on the credit card statement, and timely payment prevents unnecessary penalties.
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Total Payment due: The total payment due is the cumulative expenses billed for a specific month, which the cardholder must pay by the due date to dodge interest and fees. This sum typically includes all expenditures and any instalment loans due within the statement period. Cardholders may opt to pay either the Total Payment Due or the Minimum Payment Due, the latter being 2% of the statement total (along with interest, installments, and over-limit amount if any). Choosing the Minimum Payment, however, disqualifies the holder from the grace period.
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Interest-Free Days: Credit Cards offer an interest free period up to 55 days where no interest is charged on your spending. To benefit from interest-free days, cardholders must settle the Total Payment Due as listed on their statement by the payment due date. In case you cannot make full payment, a minimum payment - specified as the Minimum Payment Due on your Statement - should be made by the due date to avoid late fees and negative impact on your credit history, but then you will no longer be eligible to enjoy the interest free privilege.
You can further understand these concepts via the following example:
Imagine you decide to get a UOB Credit Card with a VND 40 million credit limit in February 2024, and your first statement period is in March 2024. The annual fee is billed in the March statement each year, starting from the second year of card use (in this case, from March 2025).
The card offers an interest-free period ranging from 47 to 55 days, depending on your payment history. Suppose the statement closing date is the 15th of each month, making your first statement date March 15, 2024, and the next one April 15, 2024. The bank compiles all transactions that occur between two statement periods and sends you a summary on the 15th of each month.
If you spend a total of VND 30 million during this time, the Total Amount Due on your statement will be VND 30 million. Paying this full amount by the due date means you incur no interest. Failing to do so, interest is calculated from the transaction date until full payment is made.
Furthermore, if your interest-free period is 55 days at that moment, it means you have 25 days from the statement date (March 15, 2024) to pay the Total Amount Due to maintain the interest-free benefits. Thus, April 9 would be your payment due date. Should the Due Date or Statement Date land on a holiday or weekend, the bank may adjust it to the next business day.
Mastering Credit Management and Avoiding Fees with Credit Cards
When used correctly, Credit Cards can become powerful tools to facilitate spending and easier financial management. Here are essential tips to maintain a stellar credit history and avoid unnecessary fees.
- Always Settle Your Balance in Full and Promptly
Keeping up with your Credit Card payments helps you restore your monthly credit limit and enjoy subsequent interest-free spending periods. Late or incomplete payments may subject UOB Credit Card holders to a late payment fee of 4% of the Total Payment Due and an annual interest rate of 33%.
Not Settling the Full Balance by the Due Date means forfeiting the interest-free privilege, with interest accruing on transactions from both the previous and current billing cycles from the date of transaction. Interest is calculated on the principal balance from spending, not on bank fees or interest.
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Leverage the Interest-Free Period Wisely
This period offers a prime opportunity for interest-free expenditures or “emergency loans,” free from the worry of accruing interest or navigating complex loan procedures. Cardholders can address urgent financial needs with ease, provided they can ensure payment in full before the Due Date. -
Opt for Direct Debit for Due Date Payments
Enabling a direct debit ensures your Credit Card balance is automatically settled on the Due Date, thus avoiding late payment fees. If direct debit isn’t an option, consider paying your balance several days in advance to mitigate the risk of system glitches or interbank transfer delays.
Adhering to these practices not only fosters a positive credit history but also positions Cardholders favorably for future credit limit increases and significant loan approvals for personal advancements.
Useful tips to maximize benefits from Credit Cards
Once you’ve mastered the art of using your Credit Card without incurring extra fees, you’re ready to unlock further secrets to maximize your card’s benefits.
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Prioritize purchasing from brands within the bank’s partner network
The easiest route to fully leveraging your Credit Card’s perks is to make purchases from the bank’s network of partners. Banks typically join forces with businesses across shopping, dining, travel, and entertainment sectors. Transactions with these partners can earn you exclusive benefits, such as discounts, gifts, or points towards rewards. -
Leverage 0% interest installment plans
Some banks provide 0% interest installment plans for purchases at their partner merchants. This arrangement can significantly reduce your interest expenses on big-ticket items, allowing for a more flexible and economical repayment plan. -
Stay informed about bank promotions
Banks frequently update their promotional offerings on their websites, mobile apps, and via email. Keeping abreast of this information ensures you never miss out on any deals, allowing you to seize every opportunity for financial savings.
How to use Credit Cards safely and securely?
Given that Credit Cards often do not require a PIN for transactions and allow significant pre-approved expenditure, Cardholders must prioritize security and safety when using their cards:
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Only give your card to a cashier when making a payment, and ensure you retrieve it immediately after the transaction to prevent fraudulent use.
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For offline purchases, consider covering the CVV code with a scratch-off sticker to prevent unauthorized access.
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Stay cautious with online personal transactions, and steer clear of dubious websites with unfamiliar domains. Never share your card details, CVV, or personal information on social media platforms.
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Regularly check your transaction history and thoroughly review your monthly statements for any discrepancies. Should you encounter any suspicious activity, promptly block your card via the Mobile Banking app and contact your bank for immediate support.
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Retaining receipts can be beneficial for cross-checking with your Credit Card statements, aiding both you and your bank in quickly addressing any discrepancies.
In conclusion, Credit Cards not only offer convenience for everyday spending but also come with numerous perks. Hopefully, this article has equipped you with the knowledge to use your card safely, effectively, and intelligently.
***Disclaimer: The information and numerical data provided in this article are based on UOB's policies (e.g., 4% late payment fee) and are intended for reference only. Fees and policies may vary across different banks.