The credit card industry is enormous. Anyone may become confused by the abundance of credit card options. It’s one of those technologies that, if poorly used, may leave you heavily in debt. We’ll go over some advice on how to use your credit card responsibly in this post so you don’t lose any money.
Tips on using credit cards wisely
Pay bill on time
- As obvious as it may sound, this is one of the most important points. Delaying Credit card bills even by a day could include heavy penalties and interest rates. Credit cards are one of those products which could have notoriously high-interest rates and penalties. Hence it is important to know about those charges before you start using your card.
- Your credit score is directly impacted by late payments. You will find it challenging to get a loan in the future and have a lower chance of getting one with a cheap interest rate if you have a poor credit score.
Do not exceed your credit limit
- You might be able to use some cards to make purchases beyond the set credit limit. But keep in mind that going above your credit limit will result in penalties and, once more, have a negative influence on your credit rating. When transactions exceed the credit limit, the card may occasionally be temporarily blocked.
- To avoid these mistakes, always stay below your credit limit. Just like we would never drive our car at the top possible speed it is always recommended to be below the limit assigned. To achieve this keep track of expenses. Nearly all banks provide mobile applications for cost tracking. This behavior will keep your credit score high and prevent you from facing any fines.
Be aware of hidden charges
- There can be additional costs in addition to the fines and taxes. Those extra costs might not be stated clearly. For instance, there is an extra fee when using a credit card to use an ATM. In addition, there is a cap on the amount of cash you may withdraw, which is often considerably smaller than your credit limit.
- Additionally, many of the services that are associated with credit cards are not free. Services include converting your bill into an EMI or allowing you to pay credit card payments over the phone. To prevent such fees, it’s crucial to thoroughly read the terms and conditions.
Pay more than minimum
- Usually with credit card bills, there is a fixed minimum amount you need to pay. This means if your bill is around 50,000 Rs with a minimum amount of 10000 Rs you are obligated to pay at least 10,000 Rs towards your bill. Remember, Even though you have the option to delay the payment of the remaining 40,000 Rs, a higher interest rate will be implied on that. This means next month you will be paying an even higher amount. If this cycle continues you might fall into the debt trap and find it extremely difficult to escape.
- Ideally, always pay the entire bill on time to avoid such debt traps. Still, on some occasions, if you cannot pay the bill entirely, always pay more than the minimum to minimize the losses and eventually get free from debt.
Stay updated with terms and conditions
- Interest rates and other fees are always changing. Banks and other private financial entities update them over time. You must accept new terms and conditions when these changes are explained by email. The majority of individuals accept these conditions without reading them. Even if it is not comfortable to read the lengthy legal document, it is important to stay informed to protect yourself in the future.
Check for the reward deadline
- One of the primary benefits of using a credit card is the points and incentives gained. But there may be a time limit on these prizes. This implies that you must use your rewards by then or they may lose their value.
Bottom line
The credit card is ultimately not a gift. Every rupee you spend must be reimbursed. So, manage your finances well. You may maximize the use of a credit card as long as you are aware of its terms and limitations. To know about different types of credit cards click here.
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