What is the Best Ways to Use a Credit Card ?
A credit card can be an effective financial tool, but only if it has been well used. A credit card is similar to that helpful friend who lends you money for a brief time; only that it is not used for a good purpose, and the favor may soon change into a burden. Let us know how to use a credit card the ideal way to avoid any debts or become debt-free and secure your financial future.
1. Understand How a Credit Card Works
A credit card enables you to borrow funds from the bank in order to buy or purchase something, but it has to be paid back. Your payment must qualify; otherwise, you will pay “interest” on the unpaid balance. If you pay in full and on time, you do not incur any additional charges that can add up quickly.
Key Tip: Always think of credit as money you need to pay back.
2. Set a Budget
Before swiping that card, budget how much you can afford. Spending beyond your means might leave you with an unmanageable bill.
Example: Set a credit cap within ₹5,000 if your income is ₹30,000 a month. This way, you will have money enough to clear entire credits at anytime..
Key Tip: Stick to your budget and avoid impulse shopping.
3. Pay Your Bill in Full and On Time
This is the golden rule while using the credit card, if you pay the entire amount within its due date, you will be free from any interest charges. But in case you default on your payment or minimum value is paid, you do incur costs and lower your score in that regard.
Why It Matters:
- Interest Free Period: You avoid interest charges by paying in full.
- Credit Score: On-time payments improve your credit history.
Key Tip: Set reminders on your phone to pay your bill before the due date.
4. Keep Your Credit Utilization Low
Keeping in mind the credit controls what encompasses the limit and the utilized portion of it. If a card is limited to 100,000 rupees, then such limits should never be exceeded by using more than 30,000 rupees in it at any time. Low utilization rates prove you responsible usage, which can as well improve your credit score.
Ideal Utilization Rate: Below 30% of your credit limit.
Key Tip: If your expenses are high, request a higher credit limit to keep your utilization rate low.
5. Use Rewards and Cashback Wisely
Most credit cards come with in-built rewards, be it cashbacks, points, or discounts. Use such benefits sensibly to save moolah.
Example:
- Use the card which gives cashback on fuel while fueling your car.
- Use a travel card to rack miles to redeem on a flight.
Key Tip: Do not spend just to collect rewards.
6. Avoid Withdrawing Cash
It has exorbitant charges and interest that can be calculated the very first day, as one cannot cash-in using a credit card. So, as the last alternative, it should be used during emergencies.
Key Tip: Never use a credit card; use the debit card for cash withdrawal.
7. Check Your Statements Regularly
Check your statements each month to track any transactions that were not performed or that fall outside your account’s normal criteria. Report suspiciousness straight to your bank.
Key Tip: Keep an eye on small recurring charges, because these add up really quickly.
8. Don’t Apply for Too Many Cards
True, having many credit cards is a sweet temptation. However, it gets clumsier as the number of cards increases; it also affects your score negatively. Start with one or two cards and use them wisely.
Key Tip: Close cards you don’t use, but make sure it doesn’t affect your credit score.
9. Protect Your Card Information
Ensure keeping your credit card numbers safe to avoid fraudulent use. Do not share your PIN, OTP, or CVV with anyone.
Key Tip: Use only secure websites and trusted apps for online shopping.
10. Know Your Card’s Features
All credit cards are varied. There are excellent credit cards for shoppers while there are cards best suited for travelers. Always go through the terms and conditions to see what the card has to offer.
Key Tip: Use the right card for the right purchase to maximize benefits.
For more financial tips, visit FinancialDost and take control of your money today!
Braj Verma is a resident of Rajgarh in Madhya Pradesh and is a content writer and freelancer by profession. He has a degree in Political Science from Barkatullah University, Bhopal. He has expertise in subjects like credit cards, banking, loan, insurance, political analysis and digital marketing.