Engineer's Finance

“To Err is Human, to Forgive Divine”. This is a common Idiom in English. I have told this millions of time to myself so that I don’t get stuck with the guilt. Agreed that people make mistakes and also there is no point in just keep thinking about the mistake. The better option would be to forgive them and move on. When finances come into picture, an error costs money and sometimes big money. I have had my share of stupid mistakes. Why I call it mistake is, I could have averted it but thanks to my attitude towards finances and the knowledge I had in the credit card world ensured I pay for it and handsomely too.

I had just joined the first job in the year 2005 and I was given a credit card by one of the banks and I was so happy about it. My dad said to me, “Son, it is not a good idea to have credit card.” I did not listen to him. I started happily shopping using my card. I had the sense that I should not over spend or utilize to the maximum extent. The intention was to own one and use it as and when required. The credit limit was Rs.25,000. My salary was Rs.10,000. The bank had given me 2.5 times the salary as my credit limit. At times I thank the bank for making such a rule else people like me will just use it to the maximum possible extent.

Once I had to buy gifts for my sister and I used the card for Rs. 24,500 and I did have Rs. 26,000 in my account. But I wanted to be smart. I thought let me have some money in my account and I paid Rs.23,000 towards the credit card bill. I thought I owe bank Rs.1,500 and 3% interest on that would be Rs. 45 and next month I had to pay Rs.1,545. This is how most of you would think the banks would calculate the interest. If you are not, then you are one of the guys who know something about finances and how the credit card works and you have read the credit card documents and I am glad you did.

But when the next bill came, it was a shocker to me. This is how it was calculated. I had made the following purchases and my bill is generated on 25^th of every month.

1. DVD – Rs.300
2. Movie – Rs.600
3. Bike servicing – Rs. 550
4. Dvd player – Rs. 3,550
5. Gold jewelry – Rs. 19,500

The purchases are made in chronological order. I had made a payment of Rs. 23,000. So according to the bank I have made full payment on the first four items and for the last one I have made a partial payment. Now this I did not know. The entire concept of partial payment was a shocker to me. I was surprised to see the bill. The bank had charged Rs.1,500 and interest was Rs. 585. I called up immediately the bank customer support and asked them why they have charged me Rs. 585 instead of Rs. 45 as I had calculated. The customer support representative explained me that it is not the way to calculate and explained me in detail as to how it is calculated and asked me to read the offer documents. It was one of the costly mistakes for which I paid more than Rs.500. I have learnt the lesson hard way. So don’t make any assumptions, if you don’t know, seek for the information.