9 Tips to use Your Credit Card in a smart way!

As India’s economy develops, there has been a noticeable change in the spending habits of the average Indian. With more stable sources of income, and a higher fraction of disposable income, how people look at money is undergoing a significant change. This paradigm shift has led people to apply for credit cards as a preferred way of paying off debts. But here's the thing:

What Is Credit Card?

To know what is credit card, we need to understand how to use credit card and be cautious of the expenditure on the card as it isn't as simple as it seems, especially if you're just starting out. If you're not careful, it can cost you more than you bargained for. To help you avoid making such mistakes, we have formulated a list of credit card usage tips that will ensure that you do not go recklessly on the ‘powerful plastic’ resting in your hand. Knowing how to apply for a credit card isn’t enough anymore. It’s time to learn the ins and outs of credit card utilization to know how to use a credit card to optimise your finances better.

Plan Your Repayment Wisely:

Want to know how to pay credit card bill? Before making any credit card bill payment, develop a detailed repayment strategy. Paying off your credit card bill before the due date not only boosts your credit score but also establishes a favourable credit profile. Such profiles often lead to better deals on personal loans and discounted financial products.

Additionally, consider setting up automatic payments to ensure you never miss a due date. This not only saves you from late fees but also fosters a disciplined approach to financial management. This is one of the main credit card usage tips you can implement to increase or maintain your credit score.

Use Of Credit Cards at Trusted Merchants:

Given the higher risk of credit card fraud, use of credit card with caution and only at reputable merchants is a must. Whether for local or online transactions. Many credit card issuers offer security features and fraud protection, but being proactive in selecting trustworthy vendors adds an extra layer of security.

Borrow Within Your Means:

With various credit card options available, it's common for the credit limit to exceed monthly income. Track your spending, borrow only what you can confidently repay, and avoid unnecessary interest and debt accumulation. Regularly assess your financial goals to align your use of credit card with your overall budget and objectives.

Avoid Maxing Out the Limit:

Resist the temptation to max out your use of credit cards. A good credit card usage tip is to ideally, restrict your credit card consumption to maintain a healthy credit utilization ratio. Set a personal spending limit if needed to curb overspending. Consider negotiating with your financial service provider to lower your credit limit if you find it challenging to stay within a reasonable spending range.

Time Your Purchases:

Understand your credit card's billing cycle and time your purchases shortly after bill generation for an extended interest-free period, typically around 45 days. This not only provides a buffer for credit card bill payment but also allows you to optimise cash flow.

Keep Track of Spending:

Developing discipline and awareness of your spending patterns is a crucial credit card usage tip. Maintain a detailed account of all transactions to identify and report any unauthorised activities promptly. Leverage mobile apps and online tools provided by your credit card issuer to monitor spending in real-time and receive instant alerts for suspicious transactions.

Reward Alerts:

Wondering how to use credit card reward points? Explore the benefits that credit card bill payment offers with loyalty programs, ranging from discounts to freebies. Stay updated on the available perks to maximise your card's advantages. Consider tailoring your credit card usage to align with specific rewards categories, such as travel, cashback, or points, based on your preferences and lifestyle.

Monitor Your Credit Report:

Regularly check your annual credit report for inaccuracies or fraudulent activities associated with your card. Understanding how to use credit card helps identify errors and plan your credit card expenditure effectively. If you notice any discrepancies, promptly dispute them with the credit bureaus to maintain an accurate and up-to-date credit profile.

Manage Your Credit Card Balance:

If carrying forward a balance becomes unavoidable, ensure timely payments, preferably exceeding the minimum due. The final credit card usage tip is to maintain 30% of the limit when there's an outstanding balance to maintain a positive image with potential lenders. Additionally, consider exploring balance transfer options or negotiating lower interest rates to alleviate the burden of carrying a balance.

Key Takeaways:

Manage Finances Responsibly:

Use of credit card for effective financial management and can positively impact your credit scores.

Know Your Terms:

Familiarise yourself with the terms and conditions of your credit card uses. This understanding is key to keeping your account in good standing.

Build a Positive Credit History:

Making regular, on-time payments and maintaining a low credit utilization ratio are essential steps to build and sustain a positive credit history.

Avoid Interest Charges:

Paying off your monthly statement in full can help you avoid unnecessary interest charges, contributing to a more cost-effective financial strategy.

Final Thoughts

As long as credit card uses are done responsibly, it can be an effective tool for establishing or rebuilding credit. Making on-time payments, using only the credit you need, and monitoring your credit can help ensure that your credit card uses are helping you, not hurting you.

But merely knowing how to use credit card doesn’t suffice. You must be vigilant about how to pay credit card bill. By following these credit card usage tips, you can spend wisely while maintaining a healthy relationship with money. Keeping these in mind while making credit card bill payments will ensure that you don’t get trapped in the debt cycle.