5 Amazing Tips For Credit Card Users

Credit cards are one of the most revolutionising inventions of the banking and financial industry. They have not only simplified our life (‘coz of the no-need-to-carry-cash trend) but have also come up as a fall back option in times of financial emergencies. But there is also the downside. With our over-dependence on credit cards, we have failed to keep track of our spends, often finding it difficult to repay.But to help you become an efficient credit card user, we have here for you 5 amazing tips on how to use credit cards wisely:

1. Refrain from maxing out your card Say you have been granted a credit limit of Rs 1 lac by your bank against your credit card. Does this mean that you use the entire Rs 1 lac every month? Certainly not. A bank decides the credit limit extended to you based on your salary, credit history and repayment capacity. When you start consuming more than 50% of credit limit, lenders and other card issuers view you as a credit-hungry person, i.e. someone who is not in control of expenditure. As a result, your credit score gets impacted, leading to an impact on your future loan applications. The best way to ensure you don’t stretch your credit limit is to draw a budget and stick with it.
2. Do not Revolve, be a Balance Payer

It is important that you pay your credit card bill in total every month, i.e. without any balance to be continued in the next month. Now, you would ask what happens when I carry forward my dues; here it is:

• You lose out on the interest-free period that credit cards offer and have to now pay interest (to the tune of 2.5% per month onwards) on the amount due.
• Your credit score takes a hit if you have been missing payments on a regular basis.

Therefore, limit the habit of delaying paying credit card dues. Also something that most people are not aware of – revolvers have to pay interest on the entire outstanding amount, losing out on the interest-free period!

3. Avoid Cash AdvanceCredit cards come with features of cash drawing facility. But this feature is best avoided. Reason being cash advances made on a credit card invite exorbitantly high interest rates, upwards of35% annually. If you need to withdraw cash, look for an ATM or write a bank cheque, or ask your family if it’s an emergency.

Table1: Interest Rates of Leading Banks on Credit Card Cash Advances

Suggested Read: Best credit cards in India

4. Choose Necessary Benefits onlyIn today’s day and times, there is fiercecompetition among card issuing banks. Each one of them is tryingto outdo the other by introducinga series of features.And with all cards offering so much, it often becomes difficult to decide which card to go for. It is important to choose a credit card thatsuits your spending habits best. You can be someone who loves to watch movies or one who wants to save money while making purchases at departmental stores. There are credit cards tailor made for all these uses. Try to choose a credit card which benefits most while assisting you in making your purchase decisions. Not only credit cards can be used to make most of your purchases, credit cards can go a long way to save your money too through the reward points and the cash back schemes available. [Also read: How to Choose Between Cash Back and Reward Points on Credit Cards]
5. Be Careful of FRAUDSA credit card user has to be always alert about possible credit card frauds. To counter this threat, most credit card issuershave ensured maximum safety and security by means of chip- and pin-based cards.Yet, it is necessary that one keeps an eye out while giving the card for swiping for purchases. Any information related to your credit card account should not be shared with anyone over phone or electronic mail. Ensure that you use safe payment options for making online purchases so as not to compromise on the security of your card.

Credit cards are a great way to elevate your credit scores,building a strong credit history and making you eligible to apply for other loans too. It is also important to understand that purchasing any item through credit card is ultimately taking a short-term loan which one needs to pay off eventually. Therefore, it is essential that you manage credit cards effectively.