Credit Card Payments Due

Instance | CREDIT CARDS

Tuesday, January 26th, 2010

Credit cards can be a very effective tool to teach your child to be independent and responsible about money (finance). This idea is not as farfetched as it sounds, really. Indeed it can be proven with the help of the following instance.

It is about a boy, Lucky who called upon his father two days prior to his credit card payment due date. Lucky was indeed lucky to have a rich father who believed that credit card is a very convenient means if not overspent or misused. So, he had been given the privilege of an add-on card against his father’s card. The only condition being that he would have to take permission before using it and that to, in case of emergencies only.

But, as any other teenager he did take advantage of this on very few occasions. And, of course it will not be any surprise for any parent, it was taken care of.

The only thing that made the father apprehensive was that there was a slim chance that his son might just get addicted to payment through cards! He realized that it was high time his son was aware of complete responsibility that entailed a credit card holder. That is, the whole cycle from incurring expenses on the credit card to actually paying it off.

Lucky anyways would not have been able to acquire a credit card to his name as his profile would not be eligible.

Father came up with a brilliant idea to coach his son, as he started working. He got his son a Kotak credit card from Kotak Bank secured against a fixed deposit made with them. There are other banks like Axis, ICICI and HSBC which also issue secured cards. (But for our example we are taking Kotak’s card). These cards have a credit limit of about 80-90% of the fixed deposit amount and are fully secured. Father made the deposit and got the card issued in Lucky’s name. Lucky had to pay the charges and interest if he delayed payment even by a single day and that too from his own salary.

His father also brought to his notice about the Credit Bureau, CIBIL reports, the impact of delay in such minor payments on major education loan if he wanted to take after 1 or 2 years for overseas study etc. Lucky understood the full aspect of having a credit card which showed in his next action.

He was working at a place which was about 150 km from the nearest branch of Kotak Bank and his credit card bill was due in a two days. His salary was being credited into a different bank account and distance between the two branches were about 200 km. He was worried that money would not get transferred in time. His father could have helped him out by depositing the amount in the city branch but he did not. Instead Lucky with help from his father, found a path that he could walk on himself.

He withdrew cash from his salary account and deposited it in his Kotak Bank account and then transferred the money electronically from his Kotak Bank account to his credit card account with them. Yes, it did mean that he had to travel at lengths to achieve that but this was a lesson that will help him in his future.

PS: For more information on CIBIL or credit card reports refer to our other articles.

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Tags: CIBIL REPORT, Credit Card Payments Due, Instance of Credit Cards
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