How To Use Credit Card Wisely – We just like to use credit cards. They give us the financial freedom to buy what we want, when we want, without worrying too much about paying for it. Therefore, the credit card has built a reputation as one of the financial products of choice when it comes to managing a financial crisis. If that’s not good enough, credit cards offer rewards programs that not only help you save money but also give you access to a better lifestyle.
But despite its many benefits, this open line of credit can be dangerously tempting; One wrong step can easily lead you to financial ruin. Therefore, you need to understand the dos and don’ts of using credit cards and develop the ability to use this excellent tool wisely, to your advantage. In this article we list the smart tips on how to use credit card wisely.
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10 Tips On How To Use Credit Card Wisely
1. Schedule your payment
Before considering a purchase with your credit card, you should have a detailed payment strategy. It’s a good idea to pay your credit card bill before its due date.
Not only does this help improve your credit score, but it also helps you build a good credit profile with the lender. Such profiles often get better deals on personal loans, discounts on financial products, and a host of other benefits.
Most banks also allow you to pay your credit card bills in installments. If you are experiencing financial stress, such steps will help take the burden off you and are a welcome gesture. However, in the long run, this often leads to higher interest payments, so it’s important to plan your payment.
2. Only use a credit card with trusted merchants
You should be aware that the risk of fraud with a credit card is higher than with a debit card. Therefore, it is good practice to only use a credit card with trusted merchants. It is maintained both in the case of a local store and online purchases.
3. Only borrow what you can repay
With a plethora of different credit card options available, it is often seen that a person’s credit card limit is much higher than their monthly income. It is important to keep track of your monthly expenses and only use an amount that you are sure you will pay. It saves you unnecessary accrued interest and huge debt and helps you build a financially healthy future for yourself and your family.
4. Don’t exceed the limit
When you use a credit card, the whole idea is that you are spending money that you don’t already have. It may seem tempting for new users to push them down the path of overspending. The first step here is to make sure you don’t exceed your credit card limit, no matter the situation.
Ideally, you should limit your credit card usage to 2/3 of the limit. For example, if your credit card limit is ₹3 lakh per month, you should plan your usage so that you do not spend more than ₹2 lakh. It will help you maintain a good credit card score, which will help you at a later stage.
Most banks offer the option of setting a personal spending limit on your credit card. It is an excellent option for people who are unsure about their buying habits.
5. Time your purchases
Every credit card is different and one of the first things you should do is understand your card billing cycle. Since most credit cards have a monthly billing process, if you can schedule your purchase in the days immediately after the bill is generated, you have approximately 45 days of interest-free period for bill payment. Depending on your card, the period may be longer.
6. Track your expenses
Using a credit card correctly requires you to be disciplined and understand your spending habits. Only by keeping a detailed record of all your expenses can you identify an unexpected transaction without wasting time.
When such false transactions are immediately reported to the bank, there is often room for rectification. Understand that none of this would be possible if you didn’t track your card transactions.
7. Be aware of the rewards
Almost all credit cards have a multitude of benefits and rewards as part of their loyalty program. From special discounts on e-commerce sites to free movies or plane tickets, there are a variety of benefits for credit card holders. To get the most out of it, look up your credit card company’s rewards program and stay tuned.
8. Check your credit report
Once you’re careful about your spending habits, the next step is to identify an inappropriate detail associated with the card. The details can range from things like a change in your address or employer to changes in your marital status. Sometimes errors such as fraudulent transactions or bills can be linked to your card.
Unless you read your annual credit report, you know nothing about these things. It is good practice to invest your efforts in reading and understanding your credit report. It will help you identify errors and plan your credit card expenses.
9. Be Wise With Your Credit Card Balance
While you should know how to use credit cards and pay your bills on time, sometimes carrying a balance is unavoidable. In such a situation, you need to be more careful and make sure that you make all your monthly payments on time. Where possible, pay more than the minimum amount owed so that the amount is paid off earlier.
Also remember that if you have a balance on your card, you need to be careful with your credit card usage so that your total monthly usage stays below 30% of the credit card limit. And you should always remember to pay your credit card bills on time by touching the credit card limit, while potential lenders have a vague idea of the existing balance.
10. Report Lost or Missing Credit Card Immediately
If your credit card is lost, missing, or stolen, report it immediately. Credit card companies use chips in credit cards to mitigate risk. If you do not report your card as lost, stolen, or lost and it has been used to transact, you may be responsible for charges even if they were not incurred by you.
Conclusion – How To Use Credit Card Wisely
The benefits, benefits, and rewards of using a credit card are amazing, but only if you have the willpower and self-discipline to take advantage of it. The above tips for using credit cards wisely will help you better manage your credit card money and get the most out of it.
With these 10 tips on how to use credit card wisely, you are now ready to use your credit card in a way that is good for your finances and ensures that you take full advantage of the benefits it offers.