6 Tips to Use Your Credit Card Wisely

Updated on: 04 Jan 2024 // 4 min read // Credit Cards
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Today, more than 30 Crore Indians own and use a Credit Card. While some of them seem to be responsible borrowers, there are quite a few who are accumulating Credit Card debt. This is not necessarily because they don’t have the necessary financial discipline, but because they are unaware of some simple ways that can help use them their Credit Cards more efficiently. If you happen to fall in the second category, read on to understand, how to use your Credit Card wisely:

1. Don’t Carry a Balance

More often than not, the Best Premium Credit Cards in India offer a great alternative wherein the customer can pay a minimum balance, which is usually 1% to 3% of the Credit Card bill. While this is easily payable and helps you steer clear of the late fee penalty, you must understand that you will still be required to pay the interest on the outstanding amount. When you continue to carry balance month after month, your interest can easily mount to the extent where it can be beyond your means to pay off the accrued debt. Hence, make sure you entirely avert the situation by making timely payments.

2. Build a Credit History

One of the best reasons to get a Credit Card at the start of your adult life is to build a credit history. To this end, once you get a card, all you need to do is use it as and when required, and pay the bills in full, every month without fail. If you manage to use the card judiciously and clear your bills promptly, you can easily enjoy a high credit score, hopefully, 700 or above within a few months. This could then help you in getting swifter approval for various loans.

3. Maintain an Optimal CUR

The ratio of how much you spend using your Credit Card in a month to your actual credit limit is known as credit utilisation ratio or CUR. In order to ensure that the credit bureaus perceive you as a responsible debtor, you must only use up to 30% of your credit limit. Doing so will not only help you maintain a high credit score but will also keep your spending habits in check.

4. Don’t Fall for Marketing Gimmicks

When applying for a Credit Card, it is quite easy for you to go for a card that seems to offer the best welcome bonus or the one that is priced cheaply. For all you know, the welcome gift may be provided in lieu of a high annual fee, or the inexpensive card may accrue a higher annual percentage rate (APR). Hence, it is strongly recommended for you to check the overall cost of a card that you bear, and the value it offers to you. If you are someone who will use the card very sparingly, shelling out an Rs. 5,000 annual fee wouldn’t work in your benefit. In such a case, it is in your best interest to opt for a card with little or no joining fee.

Here, we would also like to suggest that you shouldn’t buy something just because it seems to be on an offer when you make the purchase using your Credit Card. Buy only as much as you need, even if that means not reaching the desired level of CUR.

5. Use a Secured Credit Card

If you are someone with an urge to spend recklessly, then it might be best for you to opt for a secured Credit Card. A Secured Credit Card can be obtained under an arrangement wherein you offer some collateral to the bank in exchange of the card. The credit limit of the card is equal to the value of the collateral.

In this case, if you fail to pay your bills on time, the bank reserves the right to claim ownership of the collateral. This precondition will help you exercise control over your spending. Besides, a secured Credit Card is also an excellent alternative for those with no or very poor credit history, as it can help them in getting their first Credit Card, quite effortlessly.

6. Use an Autopay Service

A great way to use your credit card just the way it is meant to, is through the use of an autopay service. You can use this facility to ensure that your monthly bills are taken care of on a pre-fixed date thus eliminating the possibility of you falling behind on the payments. Not only does it help portray financial discipline on your end, but also ensures that you don’t have to incur a late fee, or pay interest on delayed payments.

We hope that you are now aware of some simple yet efficient ways to use your Credit Card, such that it works in your favour. At this point, we would like you to understand that Credit Cards are intrinsically great at offering short-term credit to individuals and help build the credit score like no other tool. It is only when you don’t use the card appropriately can it lead you to a debt-trap. On the other hand, if you follow the measures as mentioned earlier, the card will only bring some amazing benefits in the form of reward points, cashbacks, discounts, flyer miles and more!

Also Read: Are You Aware of All the Charges Associated with Your Credit Card?

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