A credit card gives you various privileges. You can spend without having to pay immediately, you get reward points on each spending that you do, there are various discount offers at merchant outlets and you get complimentary privileges too. These benefits make credit cards one of the most popular ways of transacting.
Though credit cards are a good way to transact, they also come with high-interest charges if the bills are not paid on time. If you do not use your credit card carefully, you can face severe financial consequences. If you want to avoid such consequences, here are some steps of using your card responsibly –
• Don’t overspend
Though your credit card allows you to spend without paying at once, you should spend only what you can afford. Don’t overspend. Spend within your means and resist the temptation to splurge.
• Always pay your bills on time and in full
When your credit card bill is generated, make sure to pay the bill within the due date and in full. Credit cards allow you to pay a Minimum Amount Due (MAD) and revolve the remaining balance to the next billing cycle. Though this facility sounds good, you should avoid at all costs. If you pay only the MAD and revolve your credit, you would have to pay very high interest charges on balance revolved.
Moreover, not paying the bill in full would also damage your credit score. So, avoid paying the bill partially. Ensure that the full payment is done within the due date.
• Track your spends
A credit card statement is generated with every bill. This statement shows your spending in a billing cycle. Monitor your spending to ensure that there is no error in the statement. Monitoring your statement would help you track your spends and you can weed out the unnecessary expenses from the next cycle. Moreover, when you track your spending, you would be able to spend within your budget.
• Keep your credit utilisation low
Credit cards have a credit limit up to which you can spend on the card. Though the credit limit is high, you should not maximise it. Your spending should be low so that your credit utilisation ratio (amount spent against the available credit limit) remains low. A low credit utilisation ratio would not only make it easier for you to clear your credit card bills, but it would also improve your credit score.
• Know the charges associated with the card
Besides the interest charges and a late payment fee, various types of costs are associated with a credit card. You should be aware of all these charges so that you can avoid any such usage of the card which would attract a fee. For instance, cash withdrawals, conversion of large purchases to EMIs, requests for duplicate credit card statements, etc., incur a charge and should be avoided.
Additional:- The Truth About Credit Card Application Process
These tips form the basis of responsible card usage. You should know these points and ensure that you use your credit card to the best potential. Your aim should be to maximize the rewards and benefits offered by the card while keeping the charges and interest rates to the minimum.
