Do you know that nearly 100 million credit cards are in use across India? That’s right!
Credit cards have become a common companion for many. But with great spending power comes great responsibility. Using a credit card wisely can be a smart financial move, helping you build a good credit score and manage your expenses better.
It’s no secret that misuse of credit cards can lead to a mountain of debt, high-interest payments, and a damaged credit score. But fear not! With a bit of know-how, you can harness the power of credit card to your advantage, reaping rewards and building a solid financial foundation.
To help you make the most of your plastic friend without falling into debt traps, here are 5 simple tips to keep in mind.
5 Simple Credit Card Tips
- Choose trustworthy merchants
Choosing the right credit card in India can be tricky with so many options out there. Relying only on what agents say, advice from friends, or offers you get might not lead to the best choice. It’s important to compare all the cards properly to make a smart decision. Determine your spending habits before choosing a card. Everyone spends money differently, so there’s no “one size fits all” card.
- Borrow within your means
Using your credit card wisely means only spending money you already have, not money you hope to have later. Sometimes, using a credit card can feel like spending free money, especially when you focus on rewards or cashback. But this might make you forget how much you’re really spending, and you could end up going over your budget without realizing it. Unlike cash or debit cards, you don’t feel the immediate impact of spending with a credit card. The bill comes later, which can make it easy to justify buying more expensive things in the moment.
Also Read: After ICICI and Axis Bank, IDFC First Bank Credit Card benefits changed. All details here
- Set card limit
Many credit card companies offer a useful feature that allows you to set different spending limits for when you use your card in your own country versus when you use it abroad. This can be really helpful for staying on budget and being safe with your money.
By setting lower limits for international spending, you can reduce the risk if your card is lost or stolen while traveling. This way, even if someone gets your card, they won’t be able to spend a lot before it’s blocked. It’s a good idea to align these limits with your budget and how often you travel, so you don’t overspend in any category. This helps you stay disciplined with your money.
- Don’t fall for the Minimum Payment Trap
Always pay your credit card bill in full. Some people fall into the trap of paying only the ‘Minimum Amount Due’ when they settle their bill. But when you do this, you end up paying interest on the remaining balance until it’s fully paid off. It’s better to pay the whole bill to avoid extra charges.
- Use multiple credit cards
While many people think credit cards can lead to debt problems, having multiple credit cards can actually help you manage your expenses more effectively.
Let’s say you have Card 1 with a billing cycle ending on September 30, and you have 50 days to pay without interest. But if you make a purchase on September 30, you’ll only have 21 days of interest-free credit left.
Now, if you have Card 2 with a billing date in the middle of the month, you can extend your interest-free period. Use Card 1 from the 1st to the 15th of the month, then switch to Card 2 for expenses from the 15th to the 30th. This way, you’re always getting at least 50 days of interest-free credit on your purchases.
By planning when to use each card, you can make the most of the interest-free periods and manage your payments better.
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