7 Dos and Don’ts for your Credit Card

Updated on: 21 Dec 2023 // 4 min read // Credit Cards
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Buy now and pay later is one of the most lucrative selling points that attract users to own a Credit Card. Also, the way Credit Cards are promoted by the card providers, make them a must-have buddy for your wallet.

However, there are a lot of things that you should know about credit cards, before getting one. Avoiding these preliminary, yet critical mistakes can ensure that you don’t spoil your credit rating.

1. Make the full card payment rather than just the amount due

There are a couple of items that you would see on your Credit Card Statement: the statement balance and the current balance. The statement balance refers to the amount that you have spent on the card during the most recent or the latest billing period. On the other hand, the current balance represents the entire amount that has been spent on the Credit Card till date. The statement balance is what you need to ensure that your pay every month and definitely before the payment due date.

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2. Always prioritize paying off your credit card debts

Undoubtedly, there are other debts in your list other than the credit card debt. However, what is important to understand is that the Credit Card debt is charged at a much higher interest rate compared to any other debt that you might have used. The student loan, the car loan or even mortgage for that matter, have a much lesser interest rate than the Credit Card debt that is left intact. The interest rate on credit card can vary in the range of 15% to 30% and even more, subject to the card terms and conditions.

3. Owning more than one credit card

Most of the credit card companies like the SBI Credit Card can present a great deal of lucrative offers to attract the customers and get them onboard. There would be offers like travel vouchers, free movie tickets, great shopping deals and so on. In addition to this, there would be an offer on spending a certain amount in the first few days or months of acquiring the Credit Card that would further lead to some more rewards. But, having multiple cards comes with the risk of losing track of the money spent. So you need to do the Maths before availing multiple cards.

4. Making the minimum payment only every month

The card issuer gives you an option to make the minimum payment every month. However, while this option is available, the main drawback is that you are accruing interest on the rest of the amount due on the Credit Card. Hence it’s better to clear the entire statement balance before the payment due date. This ensures that you remain out of debt and also your Credit Score remains on the higher side.

5. Learn to keep the balance as low as possible

The common advice that you will probably hear is that never to utilize the full limit on your Credit Card. Try and use only about 30% of the credit limit that has been allocated to you. The kind of impact that the credit limit has on your credit score has been a disputed topic. However, keeping the usage up to 30% ensures that your financial health remains good.

6. Understanding the APR on your credit card

Most of the times, we are unaware of what happens when we go into debt on our Credit Card and the kind of interest rate that you can accrue. Most of the times this could be the principal reason that deters credit card users from using their credit cards to the maximum limit possible knowing that they would not be able to clear off the entire credit on the card. Hence it becomes mandatory to read the card’s APR (Annual Percentage Rate) to understand the charges applicable.

7. Avoid taking out cash on the Credit Card

Other than the credit line, credit card companies also provide a convenient option involving the cash line of credit. This cash line allows users to be able to withdraw cash on your Credit Card. However, this is not the best option available. Cash withdrawal on your Credit Card attracts interest the moment you withdraw money, rather than accruing interest at the time of statement closure. Also with this cash advance, you attract a higher interest rate, which might not be the best option of credit. Also, in case you make a partial payment on the Credit Card, it gets adjusted towards the credit line first and towards the cash credit line when all the payments have been cleared on the credit line.

It is easy to fall for pitfalls into while using a Credit Card. However, what is more important to understand is that the damage is never permanent and it is definitely not the end of the world. There are various opportunities that would arise, and you would be able to correct the faults made. At the end of the day, you need to learn from your mistakes and learn and avoid making the same ones again.

On the other hand, having a Credit Card sometimes can even prove to be a blessing in disguise. Just ensure that you make the right decisions and choices when it comes to using your Credit Card.

Also Read: 7 Good Credit Card Habits to Adopt

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