Top 10 Tips To Use Credit Cards Wisely And Effectively

As per the latest survey from Times of India Indian have increased use of Credit cards in recent year, and hence the every Indian bank is entering into the Credit Card business; be it government sector bank like State Bank of India or private sector bank like Yes Bank. Most of us have a credit card or two or planning to have one shortly. Credit cards can be best tool for managing the personal finance and can make financial life easier and simpler if used effectively. You may have often heard about the potential drawbacks of credit cards use. If you can use the credit card responsibly, it will not cause any damage to your financial health. Follow the below tips to use your credit cards wisely.

Top 10 Tips For Effective Use of Credit Cards

1. Choose the right Credit card

Choosing the best credit card is an important decision. There are lots of credit cards in the market with different fees, interest rates, rewards and other incentives. All the credit cards have different features to suit different needs of the people. Therefore, it is very important to choose a right credit card for you. From the available options, find the credit card that is the best fit for your ways of managing money.

2. Know the rate of interest and other charges

Credit cards issuers charge interest on your credit card outstanding dues. You should be well aware of the rate of interest and other charges, before start using your credit card. Usually these rates are very high compared to the personal loan or any other loan. It is advicable to pay the full outstanding on credit card. Read the terms and conditions of your credit card carefully as the details of interest rates, late payment penalties, cash withdrawal fees, annual fees and other charges are mentioned in terms and conditions. Your credit card may have a grace period during which you can pay all your outstanding dues to avoid charges. Usually grace period is about 20 days depending on your credit card terms and conditions.

3. Know the credit limit

Except from the charge card all credit card providers set the credit limit for the cardholder based on various factors such as your income, credit score, spending habits and repayment history. Charge cards such as American Express comes with the no pre-set credit limit. Here, credit limit means the maximum amount the credit card provider allows you to spend on your credit card. Always keep a practical credit limit. If you are a first-time credit card user, it will definitely help to keep a tab on over spending.

4. Set a personal credit limit

The credit cards provider sets a maximum credit limit for your credit card. It is always good to keep a personal credit limit too. Try to not spend more than 30% of your total credit limit. If you are a first-time credit card user, it will definitely help to keep a tab on over spending.

5. Avoid cash withdrawal facility

Your credit card comes with the cash withdrawal facility by which you can withdraw cash from ATM which is around 20-30% of your credit limit. It is a very tempting option to withdraw cash from credit cards but does not fall into the trap, it is not your debit card. The interest rate on cash withdrawal from credit cards is the highest and bank will start charging it from the moment you withdraw cash from ATM. Therefore, unless there is an extreme emergency, you should not use credit cards to withdraw cash.

6. Check your credit card statement

All the users of credit card receive the credit card statement every month. Most of the people already know the total amount due on their credit card so they don’t care to give the statement a reading. But this is not a good habit and sometimes can prove to be costly. If there is an incorrect information in the statement, that might be overlooked. The statement of your credit card contains information about all transactions, credit limit, and available credit limit; cash advance limit and status of reward points.

7. Always Pay the full Outstanding amount

Your statement has two payment options viz. Minimum payment and full payment. When you pay only the minimum amount due of your credit card bill, you are focusing on paying more in interest charges later. This habit can get you into serious monetary trouble after some time, particularly if your credit card charges a high-interest rate. This will also affect your credit score. Therefore, when you receive your credit card statement, always pay the full billed amount of your credit card bill.

8. Keep a track of the rewards point and cash back offers

Almost all the credit cards offer rewards point or cash back. When you start using your credit card keep a track of the rewards point and cash back offers. You should know the reward program and use your credit card accordingly. You can earn reward points and then redeem your reward points for cash back, gift cards and merchandise. You should also know the redemption process and rules with regards to redemption.

9. Always check alerts

Always check all alerts you receive from your credit cards issuer through email or SMS. Credit cards issuers providing notice about the addition of new fees or increase in existing fees. Through these alerts, you will remain updated about your credit cards.

10. Do not share your credit card details

Credit cards are a wonderful financial tool, which if not used with care can damage your financial position. Credit card users should be fully aware of its working and implications. Never share your credit cards detail to people who ask for this. Before entering your credit card online make sure the website is secure and your browser displays the secure lock.

So start following above hacks for better use of credit cards and manage your personal finance better.
Do let us know your option or your tips !