Credit cards can become a cause of worry if you don’t know how to manage them wisely. Many credit card consumers find themselves in a debt trap. But this open line of credit can become your best friend and even help you streamline your monthly expenses if you know how to use it responsibly. Most credit cards come with several benefits such as reward points, discounts, and offers. So, here are a few tips to help you manage your credit card effectively to your advantage:
- Maintain a low credit-utilisation ratio: Your credit utilization ratio is the percentage of your credit limit you have spent. Your credit utilization ratio should be less than 50% of your credit limit. If you carry a high balance on your credit card (more than 50%), it will affect your credit score negatively. There is also a high chance of this balance being carried from one month to another because of the large debt on the card. This will incur interest and increase your expenses. Therefore, always maintain a low credit utilization ratio on your credit card.
- Make Timely Payments: This tip may sound like common sense to you, but it is also one of the frequent mistakes people make. Credit cards come with high interest. Any outstanding balance will begin incurring interest which is simply a wasteful expense. When you don’t pay your credit card bills on time, the interest will pile up, and your payment burden will increase. Also, missing even a single payment can lead you to pay the penalty as well as result in a plummeting credit score. To pay your bills on time, you can set a reminder on your calendar or set up automatic payments.
- Check out all the payment options: Credit card lenders usually offer more than one repayment option. For example, a lot of credit cards offer no-cost EMIs, which means that you can pay off your large expenses in small installments every month without incurring any interest. Therefore, awareness of different payment options on your card is a keen step in using it wisely and avoiding unnecessary payment burdens
- Pay off high-interest credit cards first: Credit cards have varying interest rates. If you have multiple credit cards with a balance in each one, it is important to approach their repayment strategically. You might want to pay off the low-interest ones since the amounts may be small. But paying off the high-interest credit card debts first is important. As your balance gets carried forward every month, you start accruing a large amount as interest. So, while looking at the payments schedule each month, plan to pay off your high-interest credit cards first while paying minimum dues on the rest.
- Make the most of the rewards and discounts: Credit card companies lure customers with their rewards programs, discounts, and promotional offers. Such benefits and rewards come in the form of free vouchers, access to airport VIP lounges, movie tickets, etc. Use these rewards to get the maximum benefit. You might even be allowed to accumulate reward points that you earn from shopping and other transactions and exchange it for cash or kind. However, don’t get lured simply by the offers and discounts. Read the terms and conditions of each offer carefully before diving in.
- Know about your billing cycle: Understand and mark your billing cycle. If you use your card a day after the cycle closing date, you can get 45 days instead of 21 days to make your payment. Try to make large purchases early in the cycle and get more time at hand for payment.
Your credit card can be a lifeline, especially in times of emergency. You can easily apply for a credit card online by filling a form on your bank’s official website.
