IndiaLends Advisory

By IndiaLends Advisory

Apr 18, 2019

How To Use A Credit Card Smartly

A credit card is a useful way to pay for the things you require. It offers the convenience of making the purchases at the moment but making the payment at a later time. But like any other convenient thing in the world, credit cards also come up with positives and negatives. Follow our tips to avoid costly fees and interest.

Track your spending

Credit cards literally open the ‘spending hand’ of a person. You tend to buy stuff that is not important or required. You tend to spend more in your daily routine. It is very easy to build up the debt on your card. This amount is usually much higher than the amount you can repay. This makes it very important to stay in control. You must, at all times, keep a tab on your spending.

Pay the Credit Card bill on time

It is very important to pay your credit card bill on time. The day your bill is generated, make sure to check the bill for the total due amount, minimum due amount and the due date. Make sure you pay as early as possible, which is on or before the due date. This saves you from the hefty late fee and high interest that comes added to the next bill. The autopay feature is a good way to make sure that you do not miss on the credit card bill payment. Sometimes, it might not be possible to pay the whole due amount. During that time, make sure to pay the minimum due amount at the earliest.

Credit card repayment – Maximize it

It is advisable to pay the whole due amount for each billing cycle. In case that is not possible, make sure to pay the maximum amount close to the total due amount. This is advisable because if you keep paying the minimum due amount, you pay high interest every month, which could take years to pay off. If you cannot pay more than the minimum due amount, consider using a credit card with a lower rate of interest. While switching the credit cards, make sure the old credit card is completely closed and you do not end up with more debt. Many lenders offer credit card balance transfer.

Credit limit should be sensible

A credit card is issued with a credit limit, which varies from person to person. Higher credit limits might lead to more debt. Credit limit should be an amount, which you are sure that you can repay easily. Credit limit should not tempt you into spending more than what you can afford. You can reduce the credit limit by contacting your card issuer. This reduces the chances of overspending. If you need to make a purchase that is more than your current credit limit, you can ask the credit card issuer to increase the credit limit. But make sure, you pay the debt quickly and then get back to your old credit limit.

Credit card is not to make ends meet

If an unexpected expense comes up, you can use the credit card, however, this will not help in the long run. It will sort the immediate crisis, but you might end up in more debt. It is advisable to have some savings for such unexpected situations rather than depending upon your credit card.

Choose and use your credit card wisely

Sometimes, the credit cards with high reward points and good offers come up with a high rate of interest. Banks give you exclusive offers and discounts at many places, both offline and online. However, these offers might come up with high annual fee or higher minimum yearly expenditure. This increases your credit card expenditure. Go through terms and conditions carefully before signing up for a credit card.

Check your statement regularly

Old and reliable way to check your bill statement is to keep the bills handy and tick-off the expenses from the statement. However, under the green initiative, you might not ask for the receipt while making the purchase through the credit card. You still get the SMS and email informing about the card being used. Cross check your monthly credit card statement with these SMS or emails. This helps in figuring out that you have been charged correctly or not. This also helps in making sure your card is not being misused by the phishing and card cloning groups. Make sure to give special attention to duplicate and large purchases. In case, you find out a transaction in your statement, which was not made by you, contact your credit card issuer immediately. They might be able to reverse the transaction.

Close your credit card properly

Just cutting up your card does not mean closing the account. In order to close your credit card properly, make sure to pay off the whole debt. Get in touch with your issuer regarding this and make sure to get it in writing that you have successfully and completely closed the credit account. If there are any joint or add-on cards, make sure to close them properly too.

Do not max your credit card out

Make sure that your card usage is generally 50% of the credit limit. High credit card usage leads to high credit utilization ratio, thus affecting your credit score in a negative way.

Do not use your credit card for cash withdrawals

While your credit card offers the facility of withdrawing cash, you must avoid it as much as possible. The service charge is too much along with a high rate of interest and GST. Paying so much for cash is not worth and this should be avoided.

Do not let the reward points expire

Most of the credit cards these days offer reward points. You can track it via your monthly statement or by logging into your credit card net banking facility. These reward points have an expiry date; hence you should redeem such reward points at the earliest and at regular intervals. One of the primary reasons for many customers is the reward points associated with the particular credit card and it is important to use them wisely.

Credit cards are high in demand these days. They are handy during cash crunch or financial troubles. They score over a debit card because of the reward points they bring with them. Credit cards can be used offline (like paying for stuff you purchased while traveling by air), while the same is not the case with the debit cards.

Before you get a card for yourself, one thing to keep in mind is that you should compare and choose the card that is best suited for you and compliments your lifestyle. Online portals like IndiaLends can come in handy for just this. There are more than 50 credit cards from the world’s top banks with unmatched offers and exciting rewards that you can choose from.


Previous Article: Types Of Financial Transactions That Can Harm Your Credit Score or CIBIL Score


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