Guru Speak

  Nothing could be further from the truth. Banks look for prompt payment by customers … peri¬od! If you have a credit card, loan or mortgage, please make sure to have the due dates written down and be sure to pay the bills before the dates.

Payment on time is a very important indicator of your cred¬itworthiness. If there is one habit you would like to kick, in building up your credit, it is procrastination in making pay¬ments.

There are some who face genuine stress in making monthly payments either due to lower income, higher expenses, increased debt payments or a combination of the above.

Unfortunately, there is no quick fix except to follow per¬sonal financial discipline or con¬solidate the debts into one large loan.

However, making late payments as a habit is just not acceptable and hurts your financial credibility even though your financial status may be good.

Banks work on data, models, indicators and probabilities. This unfortunately does not help the cus¬tomer who is tardy in paying.

Paying on time on most instalments doesn't help ether. We need to pay all minimum payments on time.

If you are the type of person who pays only the minimum due, try and pay more than the minimum on some of the loans or cards - obviously the ones with the highest interest rate.

Ideally all credit card transac¬tions are paid monthly and at worst paid off in three to six months based on cash flow. Loans on the other hand require payments of a fixed monthly amount.

Often there is no incentive for the customer to make payments in advance. It is important for us to know those debts where inter¬est is reduced if paid off earlier.

It would help us prioritise monthly payments to the right loans/credit cards. Secured lines such as mortgage credit would have the lowest rate of interest and therefore may be the one where minimum payments would suffice.

Another simple technique is for customers to minimise the number of facili¬ties that need to be paid month¬ly. It is possible to combine all payments into one secured or unsecured line and make one monthly payment.

This will not only save having to remember all the different due dates, much less paying late on some, but also save money on payments through service channels. Banks also offer the facility to direct debit your account to pay your credit card or loan on time. Direct debit or standing instructions also allow you to time your payments based on the date your salary is received.

Paying on time has monetary benefits as well. Banks tend to reward prompt payment customers with rewards and rebates. In fact, the cost of man¬aging a good customer may be lower given no cost for collec¬tions.

These then get translated into better interest rates or offers on similar or other lines of credit. Your credibility provides the financial security that you so need. In times of need, a good customer can expect to be com¬forted by the fact that his banker would be there to help them.

While financial instruments do help customers in times of need, it is important to under¬stand that these contracts usu¬ally are spread over time and nothing could be more impor¬tant than to honour these con¬tractual obligations every month on time.

These techniques of loan con¬solidation, payment on time, paying more than the minimum due, paying off debts with higher interest rates and having fewer credit lines to start with would let you be in control and "Use Credit Wisely".

Anantha Srinivasan Vaikuntam is  head of product development and marketing at Citicorp Leasing (Thailand). The views expressed herein are the author's own.