A credit card is an important part of your financial life and you use it for various purposes like online shopping, paying bills, fee submission, store shopping, cash advance, and more. A credit card has an advantage over a debit card in the sense that if you have ordered something and if it doesn’t get delivered on time then you can ask your bank to cancel the transaction and recover money. However, in the case of an ATM usage, the money goes directly into the merchant account and you can’t do anything except wait for the delivery or rely on the goodwill of the merchant for returning your money.
Use a Credit Card but be Sensible
Most of the people misuse plastic cards and forget like they never have to pay the card bills. Missing credit card payments or partial payments increase more debt on your head. In sum, a credit card is very helpful if you use it properly otherwise it leaves you bankrupt and your credit score goes low. Here, we discuss 11 smart tips to use a credit card better:
1. Choose an Ideal Credit Card for you
Various banks offer multiple types of plastic cards like EMI cards, gold cards, platinum cards, reward cards, specialty cards, cash back cards and more. You are required to choose a card as per your need. Some cards are lifetime free and there is no joining or annual fee; and some cards costly and have an annual fee, subscription charges, and other hidden charges. Be cautious while choosing a credit card and ensure there are no hidden charges to give you a headache in future.
2. Thumb Rule – Pay Credit Card Bills on Time
Every credit card comes with some interest-free period. It could range from 20 to 55 days depending on the bank. If you pay the whole credit card bill within this period then you don’t have to pay any interest. A credit bill is generated after a fixed date and there is a due date by which you have to pay at least minimum due amount. If you somehow forget the due date and paid late then it could result in penalty plus interest charges. So be quick in paying the card bill on time.
3. Minimum or Partial Payments should be Avoided
All banks offer flexibility on paying the credit card bills. You need to pay at least a small due amount and rest amount gets added to the next billing cycle with interest. It looks very convenient but it is actually a trap. Paying only the due amount in each credit billing cycle will result in a large amount of debt. Always try to pay the complete amount instead of partial or minimum due amount. If there is any financial crunch then paying the minimum due amount is OK but be careful.
4. Spend Sensibly and Track your Purchases
A credit card is in your pocket to make your life convenient and you should use it sensibly. There is no point of buying things unnecessarily and increase the credit card bill. It is actually a loan, not your hard-earned money. One day, you have to repay it and you shouldn’t forget that your credit usage is directly related to your credit score. If you misuse it or default, then automatically your credit rating goes down. You can create a tracker to monitor your usage. Also, there are many spending apps that you can download to your mobile phone.
5. Ask for a Lower Credit Limit
Some banks and financial companies offer high credit limit to even new customers. A high credit limit is good only when you are in a sound financial position to repay or facing a financial emergency and you don’t have any other option except a credit card. Otherwise, a high credit limit always results in over expenditure and so more debt. Always start using a credit card from a lower limit and if you feel it is easy to repay then you can ask your bank to increase the card limit.
6. Negotiate for a Lower Interest Rate
You can ask your bank to convert high-value transactions into EMIs. Your bank may charge the interest rate but it is convenient to pay. Try to negotiate for a lower interest rate with your bank. Most of the banks have fixed interest rates but their decision varies from customer to customer. Some customers have a very good credit score and the bank doesn’t hesitate in offering a lower interest rate on the converted EMIs.
7. Read your Credit Statement Thoroughly
A credit card statement is generated by your bank or credit company after each fixed cycle. It has complete credit usage details like date of transactions, amount, where you spent it, earned reward points, levied charges, EMIs, available credit limit etc. Please read it carefully. They may have charged you for something that you haven’t bought. Or they may have levied some extra charges. Just keep a close tab and call to their customer care in case of any discrepancy.
8. Don’t forget to Earn Reward Points
Most of the bank and credit card companies offer reward points on the selective purchases. The card holders can earn reward points, cash backs, or miles. Plus, there are cash backs offered by some stores, merchants, and websites. Just check out for such deals. It may add double joy to your purchase.
9. Say NO to Cash Advance
Every card has some cash advance limit and you are allowed to avail it. But it is highly undesirable and costly. Most of the banks and card companies charge a very high-interest rate on the cash advance that you withdraw. Their interest meter runs from the date of the transaction to the date when you fully repay the credit card bill including the cash advance.
10. Improve Your Credit Score
If you have a bad credit history then you should use a credit card for improving your score. All you need is to do purchases on your plastic and repay complete bills on time. Your credit card bank or company will report your current repayment status to the credit bureaus and hence your credit score will improve.
11. Never Consume a Full Credit Limit
You are advised not to consume the full credit limit. Suppose, you have a card with 2000 pounds credit limit. You shouldn’t do purchases of exactly 2000 pounds. Stop the card usage once your bill reaches 1700 pounds. Pay the card bill and then start using it. It gives an impression that you are always desperate for money and so has a bad effect on your credit score. Many lenders don’t like it at all and they reject your loan application when you apply it. Also, banks and credit companies charge high if you cross the maximum card limit.
The Bottom Note for the Card Holders
Your plastic card is one financial friend that helps you out in sudden expenses and small financial crunches. It gives you convenience and some interest free time to repay. But you make it foe by using it foolishly. Be smart and play safe with your plastic card!!