How to use a credit card wisely: An essential guide

Credit cards are emerging as a convenient and mainstream payment device worldwide. These cards, issued by certified financial institutions, allow you to pay for your purchases. The cardholder pays back the borrowed amount to the bank along with the applicable interest rates. Users can also score exciting perks such as discounts, rewards, cashback, and offers. A credit card can be a bane or a boon depending on how the holder is using it. Do not let your credit card become your liability, instead make it a tool to help you when you need financial assistance.

1. Keep Track of Your Expenses

When you have no strict restrictions on how and when to spend money, it is easy to lose track of your spending. While it may not initially seem like a big deal, it can accumulate into an impending burden on your shoulders. To avoid hefty bills, staying mindful of your card usage is advisable. There are multiple ways to do so. You can:

Keep a regular check on your credit card statements
Categorise your spending using an excel sheet or budgeting apps

2. Map Out Repayment Options

It gets real when you have to pay the credit you’ve used. However, you can minimise these concerns by determining your bill payment options in advance. Financial institutions and providers are highly flexible in accepting various payment methods for clearing your bills. You can choose to repay your credit card bills through:

Credit card balance transfer
Equated monthly instalments (EMI)
Automated deductions
Cash payments
Cheque
National Electronic Funds Transfer (NEFT)
E-wallets
Net banking

You can consult your respective financial provider to understand your options. In fact, a certified financial advisor can also guide you on how to pay credit card bills through a credit card.

3. Redeem the Reward Points and Offers for Maximum Benefits

A stand-out benefit of credit cards is that they offer attractive perks with each transaction. Depending on your card type and provider, you can get discounts, rewards, points, and other offers. To extract maximum utilisation of a credit card , you must collect and redeem these offers to make your life simpler and more convenient. Avail these benefits in various categories such as travel, entertainment, utilities, and lifestyle to have a fulfilling experience.

4. Be Prompt in Paying the Monthly Bills

As a responsible cardholder, you must be on time for bill repayment. Credit card issuers have strict policies for delays in due clearance. If you miss out on paying a month’s bill, the amount and extra interest are carried forward to the next month. If the repayment delay surpasses 60 or 90 days, it takes a toll on your credit card. Any further negligence or avoidance is punished with debt traps, loan application rejection, or even legal troubles. Save yourself from such severities by making timely repayments.

Suggested Read: Credit Card Charges That You Should Know About

5. Opt for Credit Card Protection Plans (CPP)

Threats and dangers to your money are inevitable. While you can’t altogether avoid these situations, you can stay prepared to tackle them if you encounter one. When protecting your credit card, buying a CPP is a solution. It acts similarly as insurance but for your cards. These plans safeguard you from damages, losses, or theft. It also helps with card blockage, emergency cash advance facility, and document replacement features. All these features ensure all-round protection of your card.

6. Refrain from Opting for Multiple Cards at the Same Time

Many people think that multiple cards, each for a different type of expense, is a smart idea. However, there are many loopholes in this idea. Keeping track of expenses and repayment for multiple cards can get overwhelming. Applying for multiple cards in a short duration can also damage your credit score. Capacity Utilisation Rates (CUR) exceeding 30% is also an ominous sign of unreliable credibility.

7. Stay Aware of the Hidden Charges

Many banks aren’t too transparent or upfront about the charges applied to their credit card provisions. Most of the additional fees are hidden from applicants during their application for credit cards. To avoid being bombarded with unnecessary costs at the time of billing, demand honest transparency from your provider. Be sure to ask them about the following costs:

GST charges
Maintenance fees
Late payment fees
Charges on foreign transactions
Cash advance fees

8. Use Your Card Only with Trusted Merchants

In a world where fraud is alarmingly common, you must be utterly cautious while providing your card details to any merchant. Whether making transactions online or in person, ensure that your dealer follows encrypted and authenticated transactions. For digital merchants, ensure that they have strict policies about keeping your payment details confidential.

9. Avoid Using Credit Cards for Cash Withdrawals

While it isn’t that complicated to understand how to get cash from a credit card, it isn’t advisable to do so. ATM cash withdrawals from credit cards levy heavy transaction fees. Furthermore, these charges have no provision for zero interest or a grace period. Hence, it is best to avoid these unnecessary costs.

Suggested Read: Want to Cancel Credit Card?

To sum up, merely knowing how to use credit cards doesn’t suffice. You must be vigilant and mindful when dealing with digital payment methods. By following these tips, you can spend wisely while maintaining a healthy relationship with money. Keeping these tips in mind while making payments through your credit card will ensure that you don’t get trapped in the debt cycle.

FAQs

What are some tips for using credit cards wisely?

Tips for using credit cards wisely include keeping track of expenses, mapping out repayment options, redeeming reward points and offers, paying monthly bills promptly, opting for credit card protection plans, refraining from multiple cards, being aware of hidden charges, using cards only with trusted merchants, and avoiding cash withdrawals.

How can I keep track of my credit card expenses?

You can keep track of credit card expenses by regularly checking your credit card statements, categorizing your spending, maintaining an excel sheet or using a budgeting app.

What are the repayment options for credit card bills?

Repayment options for credit card bills include credit card balance transfer, equated monthly installments (EMI), automated deductions, cash payments, cheques, National Electronic Funds Transfer (NEFT), e-wallets, and net banking.

How can I make the most of reward points and offers on my credit card?

To make the most of reward points and offers, collect and redeem them in various categories such as travel, entertainment, utilities, and lifestyle to enhance your overall experience.

Why is it important to pay credit card bills promptly?

Paying credit card bills on time is crucial to avoid penalties, extra interest charges, and potential negative impacts on your credit card. Timely repayments demonstrate responsible financial behavior.

What are credit card protection plans (CPP)?

Credit card protection plans provide insurance-like coverage for your cards. They safeguard against damages, losses, theft, and offer features like card blockage, emergency cash advance, and document replacement.

What charges should I be aware of when using credit cards?

When using credit cards, be aware of charges such as GST charges, maintenance fees, late payment fees, charges on foreign transactions, and cash advance fees. It’s important to seek transparency from your credit card provider regarding these costs.

Priyanka Juyal

Priyanka Juyal- a Writer with a curious mind & vision to create the best out of words. Other times, see her playing the guitar, sketching or narrating folk tales!