A credit card gives you great purchasing power and money-saving rewards while helping you boost your credit score. However, it is easy for you to go overboard when you swipe it without a plan or a budget.
The best way to leverage this financial tool is to understand all about the features of a credit card before you use it. To help you do just that, here are the 10 top tips to keep in mind.
Pick the right credit card
The first essential step is to choose the right credit card. This means checking if its features & use such as:
- Shopping credit cards
- Travel credit cards
- Fuel credit cards
- Lifetime free credit cards
- Secured credit cards
- Co-branded credit cards
Learn about all the applicable fees
Credit cards may be called plastic money, but it’s not all that simple. All credit cards come with charges such as:
- Joining fees
- Annual fees
- Late payment fee
- Fuel transaction fees
- Reward redemption charge
- Overlimit charge
The main one is, of course, the credit card interest. Keep all these fees in mind as they come into play once you start using your card.
Swipe your card based on your finances
Recklessly using your credit card without a thought to your budget or income can lead to a debt trap. So, ensure that you don’t swipe your card without a plan.
Remember that even though swiping a card doesn’t lighten your pocket right now, you will eventually have to pay your dues.
Use your credit card for pre-selected expenses
In order to avoid overspending and benefitting from your credit card’s perks, make a list of expenses that you will use your card for. This will benefit you in various ways:
- It helps you avoid unplanned expenses
- It helps you pay for transactions that offer rewards or cashback and save money
- It helps you avoid using the card for myriad smaller expenses that can build up to a huge sum
Follow safety practices
With rising credit card fraud in India, it pays to be vigilant. To protect yourself, set a transaction alert, so you get a message whenever your card is used. Secondly, know the process to alert your bank when your credit card is misused. And third, report a lost or missing credit card immediately. Apart from these measures, do not share your OTP or PIN with anyone in any way and be careful about your CVV number and card expiry date too
Follow sound practices to boost your credit score
Credit cards are a great way to build and improve your credit score. However, this means using your card smartly. Follow these tips:
- Pay your bills on time, in full, and not just the minimum balance due to avoid attracting late payment charges and penal interest
- Ensure you don’t swipe your credit card to its limit every month
- Maintain your credit utilization ratio at around 30-50%
Know the charges for credit card EMIs and cash withdrawals
It is very tempting to use your credit card to convert big-ticket bills into EMIs. While this is a benefit of having a credit card, some issuers charge a hefty processing fee or EMI transaction fee.
Similarly, check the cash withdrawal charges if you plan to use your credit card at the ATM to meet a cash crunch. While issuers may advertise that this withdrawal is interest-free, interest may apply after a specific duration.
Check your spending history to monitor your use
Your credit card statement lists all your transactions and tracking these helps you in many ways.
- Allows you to plan your finances and analyse your spending habits better
- Permits you to understand all applicable charges on your credit card
- Helps you find any unauthorised transactions and raise concerns
Make sure you set the credit card purchase limit
Did you know that you can set a usage limit on your credit card for different categories like domestic and international transactions? This daily purchase limit helps you to control your spending.
More importantly, it helps you limit your risk in case your credit card is stolen or lost and misused.
Use rewards to your advantage
A joining benefit or a gift voucher is a common way that issuers get your attention. However, credit card rewards just start here. You can also get cashback, fuel surcharge waivers, discounts on online shopping, deals on dining and travel bookings as well as reward points that you can redeem.
With these tips in your financial arsenal, you can ensure you use your credit card to boost your financial health. To browse and compare top credit cards and apply online with ease, download the Bajaj Markets App.
This digital marketplace gives you access to a range of financial and lifestyle products. So, get it now on the App Store or Play Store and apply for the best credit card.
Photo by Mark OFlynn on Unsplash
