Today, credit cards are literally being given away free with soap, which is why every second person you meet has at least two cards. This also means that many users do not know what they are getting into.

For instance, did you know that the longer you delay in paying off the credit card balance, the more money the card company makes off you?

That’s because, until recently, credit card companies did not have to reveal costs for cash advance fees or late fees on card payments, or even revolving credit card charges.

It is only recently that the Reserve Bank of India (RBI) has begun enforcing some regulations, making credit card issuers come out with charges, interest rates and payments. Companies will now have to provide illustrations, so that card-holders understand what they are paying for.

The RBI has also stipulated that companies should send a copy of the Most Important Terms and Conditions (MITC) with every credit card statement, going to the extent of specifying a font size for this.

Credit card holders these days are eager to fight to protect their rights. But most of them forget that they have to cover their bases first. For instance, the MITC is something every card-holder must read and understand— but most of them neglect. Most of them don’t even understand how credit works. So, here are a few points I think are most important.

• When you use a credit card, you are effectively borrowing money. Be aware of the interest rate and its effect on any delay in payment.
• Know what to do in case the card is lost, stolen or damaged. Keep note of the toll-free numbers and contacts to reach your card issuer.
• Find out if you really need all the features and addons that the card comes with. Once you decide, find out how to claim these benefits.
• Most important, know the interest-free period and find out how interest rates are levied on fresh purchases if you are revolving your card.

By Vijay Mehta, Chief Consultant, CCMC