Credit cards help you simplify payments and get some perks in the process. However, it is important to understand when and where to use your credit card to avoid ending up in debt. To make the most of your credit card, consider the tips given below. These practices will help you use your credit card effectively and responsibly, allowing you to attain financial wellness along with a higher purchasing power.
Best Practices for Using a Credit Card
If you’re looking to adopt practices that will help you make the most of your credit card, these tips will help you maximise its benefits.
Understand Your Billing Cycle
Based on your credit card provider, your billing cycle may be between 28 to 30 days. It’s important to know the start and the end date of your billing cycle so that you can use your card accordingly.
If you have a large purchase to make and need more time to repay the bill, consider making it at the beginning of the cycle. Once your billing cycle concludes, you get around 15 to 20 days to pay your bills, which makes your interest-free period about 45 to 50 days.
Know the Interest and Fees Structure of Your Credit Card
There are several types of fees associated with a credit card. You have to make sure that you consider all these, which may include:
- Joining fees
- Renewal fees
- Late fees
- Interest rate (on the outstanding balance)
- EMI processing fees and interest
- Cash advance charges and interest
Understanding these charges in detail can help you manage your finances effectively and avoid unnecessary costs.
Review Your Credit Card Statement Minutely
Every month, when you receive your credit card statement, study it thoroughly. This will help you notice if there are:
- Any discrepancies
- Any unfamiliar charges
- Any incorrect amounts
In case you find any of the above, you should reach out to your issuer immediately; this will help save you from financial loss. As per RBI guidelines, reporting fraudulent transactions within 3 days can help you avoid liability in case it was not due to any negligence on your part.
Check Your Credit Score Regularly
Your credit score helps determine your creditworthiness. How does a good credit score help? They help in unlocking lower interest rates and higher credit limits. Regularly monitoring your credit score can help you stay on top of your financial health and identify any fluctuations caused by your credit card usage.
For instance, if you use your credit limit above 40%, your utilisation ratio increases, and this can adversely affect your score. Not paying your bills on time can also decrease your score. Keeping an eye on your score is simply a part of using your credit card carefully.
Convert Your Credit Card Bills to EMI
Another practice that you can cultivate is paying your bills on time. This will help build your credit score without hampering your monthly budget. Switching to EMI (Equated Monthly Installments) can be a smart strategy if:
- You’re making a large purchase
- The outstanding balance in your bill is too high
EMIs can help manage your finances flexibly and not default on payments. Make sure you consider the processing charges and interest before proceeding. Getting a credit card with zero-cost EMI can be a great way to reduce costs and enjoying this facility to the fullest.
Pay Your Bill By the Due Date
Say your credit card due date falls before your salary is credited. For example, every month, your salary is credited into your account on the 2nd of the month, but the due date is the 29th. In such a scenario, change your billing cycle.
Credit card companies allow you to do this once a year, and choosing the right cycle can help you pay your card on time. In case, you are short of funds, ensure you pay the minimum due before the due date to prevent late payment charges from being applied.
Use Offers and Reward Points before They Expire
Some of the main benefits that are associated with credit cards are:
- Cashback
- Reward Points or Air Miles
- Discounts
What you must remember is that these benefits usually come with expiry dates, so make sure to redeem them before they lose validity.
Stay Alert
Making payments with a credit card offers many benefits, such as fraud protection or zero liability, but it’s also important to use your card cautiously to avoid potential scams. You must have good knowledge of where to use a credit card, such as on trusted websites, so that your money stays safe. Also, ensure you do not share important details like your card number or PIN with anyone.
Set Alerts for Credit Card Usage
What can help you stay within your budget and keep your credit utilisation ratio in check? It is setting alerts! These alerts will notify you when you’re about to cross your spending threshold and will help curtail your expenses. You must always try to keep your utilisation ratio below 30% to ensure your creditworthiness is high. This also helps you ensure your bills are not out of bounds and helps you pay them on time.
Cards like the One Credit Card ensure a more comfortable financial journey for you. This exciting card offers numerous rewards and discounts and offers great features through its powerful OneCard App. Through it, you can enjoy instant zero-interest EMI for eligible purchases, access a quick loan, pay recurring bills and rent with ease and find the best offers around you via GPS.
It also allows you to set a budget for different payment categories and get notifications, so you can use your credit card efficiently. Apply now for this lifetime-free card and get 5X reward points on your top two spending categories every month.
