Every coin has two sides

The convenience of credit cards and the "buy-now-pay-later" model has attracted a large number of users.

However, plastic money has its drawbacks. Most people have more than one credit card, but few really understand how they work.

It's essential for cardholders to study the rules, interest rates and other conditions set by the financial institution issuing the card.

According to the Bank of Thailand, banks can charge a maximum annual interest rate of 20% for the outstanding balance on cards. However, some providers charge only 18%.

For those wanting to avoid these high-interest burdens, they must make sure they pay their bills in full and on time. Otherwise, they will be charged penalty fees in addition to the high interest rates.

Normally card users are obligated to pay a minimum of 10% of the total outstanding balance.

In cases where cardholders fail to pay their bills for three consecutive months, their credit will be downgraded and classified as a non-performing loan.

When it reaches this stage, the cardholders' bad credit history will be sent to the National Credit Bureau. A bad credit report can hurt any future loan applications.

How to  select the best  credit card

There are a large number of credit cards on the market from various issuers. So cardholders should carefully consider the options and select cards with the most benefits that also match their needs.

It's wise to first find out the rates, terms and conditions and annual fees of each card.

It's also necessary to check if the cards offer any perks. Some cards offer good deals, such as discounts on insurance, restaurants, department stores, movies, petrol stations, hotels, frequent flier miles, cash bonuses, etc. So choose the one that will benefit you most.

Do's & Don'ts

There are no fixed rules suggesting how many credit cards one should carry, but here are some guidelines.

Try not to carry too many cards. The more cards you have, the more likely it is that they could end up in the wrong hands. If that happens, notify the issuer immediately to avoid problems.

Use your credit card only when necessary. Avoid the habit of making everyday purchases with your card, mainly because it's easy to lose track of how much money you're spending each month. And that could lead you to fall behind on payments.

Avoid using a credit card to buy things you can't afford. It's that simple.

We all know how easy it is to swipe a card through a machine to take home a big-ticket item. Don't forget that reality will hit you at the end of the month when the bill arrives.

So "buy now, pay later" only works when you know what you can afford.

Try to settle your bill on the due date and pay the full amount as there's always a high cost if you don't. Bear in mind that you will have to pay interest when you pay only the minimum amount.

There's always a high penalty fee if you miss the payment due date.

Delay making unnecessary purchases. If you know that you have swiped your card too many times this month and the amount will exceed your personal budget, then put off buying more things and postpone making any more purchases until next month.

Always keep the receipts of every purchase you make so you can check them against the monthly statement.

Relate Search: buy-now-pay-later, Bank of Thailand