How to Use your Credit Card Smartly: 6 Tips to Keep in Mind

India saw an increase of close to 8 million credit card users in just 10 years. Statistics also show that the number of credit card users is increasing rapidly at present. As of March 2018, the country had 37.48 million users witnessing a 25% increase from 29.8 million in March 2017. So, whether it is the easy access to credit, the air miles you gain, the rewards and cashback on offer, or just the fact that a credit card is universally accepted, having a credit card is popular among Indians today. If you are too are joining the cashless revolution, here are some tips on how to use credit cards in a smart way.

Maintain a tight budget

A credit card offers you access to money quickly and easily, and can be a great boon if you know how to manage it wisely. Be careful of how you spend the borrowed amount or it can place you in a cycle of debt. To avoid such a predicament, ensure you plan your large expenses like your child’s college fees, beforehand. This will reflect positively on your credit score and shows lenders that you pay your dues on time. Use an app to track your monthly expenditure to ensure you do not go overboard.

Stick to your credit limit

Based on your credit and repayment history, banks and financial institutions will offer you increased credit limits. The deal can sound very appealing, but it might not be something that is beneficial in the long run. This is because it can tempt you into becoming too dependent on credit or spend more than you can comfortably repay. The other thing to note is that since your credit score is affected by your credit card usage, you shouldn’t cross 80% of your credit limit at the end of each billing cycle. This way, you don’t come across as credit hungry, and this boosts your credit score too.

Pay the entire outstanding amount

Aim to clear the entire bill at the end of each credit card billing cycle instead of just paying the minimum amount that is usually 3% to 5% of the amount spent. Remember that you pay interest on your outstanding amount and over time that can lead up to a lot. Paying the minimum amount keeps away the late penalty fee, but attracts interest on the balance. Paying the entire amount boosts your savings dramatically, builds your credit score, helps you display a health credit utilisation ratio, and helps you clear debt faster.

Look for rewards that matter to you
Credit cards offer you a range of features such as cashback, discounts, and reward points. So, when choosing a card, look for credit card offers that help you increase your savings. For example, if you travel a lot, check which card offers you the best deals. If you are a tech-whizz and gadgets matter to you, search for a card that converts points to discounts on your electronics purchases. This way, you will end up saving big.

Use your credit card safely and securely

CVV and PIN are two things you do not want to be sharing with anyone. Some users go so far as to remember their CVV and scratch it off their card. You can take a cue from them or make sure that you change your password frequently and use a virtual keyboard to feed them in. Be very careful of websites where you need to use your card online. Look for the https in the website name. The ‘s’ stands for secure, which is something you must always be vigilant about. It means that your communications with that website are encrypted and protected. Steer clear of any website that has an IP address instead of a domain name.

Leverage the interest-free period

Plan your purchases and expenditure beforehand. This should be weaved in a manner that benefits you by using the interest-free days of your credit card so that you pay no more than the purchase price. Check your billing cycle dates and the number of interest-free days your lender gives you. When you do this, you can purchase expensive items or services such as international flight tickets, a 4K television, or a new car and avoid paying an additional sum as interest while building your credit score.

Use these tips to improve your experience of using a credit card. When it comes down to answering how to use credit cards to leverage your financial position, you should seek to take on good debt that helps you increase your credit score and credit card limit over time. Make sure you also pay attention to special features of each credit card. Most people will tell you not to withdraw money from an ATM using a credit card, as you incur heavy interest rates.

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