World over, most of the economies are moving towards a digital economy. Even in India, the use of plastic money is witnessing a rapid acceptance and use of plastic money. Post demonetization, there has been a shift in the attitude of the people towards the credit cards. In March 2017, there were over 29.8 million active Credit Cards in our country.
Credit Cards have started to be used for a large number of transactions, despite the interest charges associated with them. They are easily available and can be paid off through comfortable EMIs. They also give access to innumerable discounts and rewards. The only drawback that seems is the lack of financial discipline. This can lead to careless usage and can result in hefty penalties.
Here are 10 important things that you must take into account if you are a regular Credit Card user:
- Timely Payment of Due Amount
This is the most important rule to follow. Whatever is your due amount, pay it before the time period set by the Issuing Bank. This time period is generally kept between 15 to 40 days. If you fail to pay the outstanding amount within the stipulated time, you are charged with an Interest Rate that may range anywhere from 24% to 48% per annum.
On failing to pay your due amount repeatedly, the CIBIL score gets affected and might show a negative turn. Therefore, it’s imperative to pay off the outstanding amount of your Credit Card, as quickly and ideally within the free time frame. Otherwise, it may result in penalties and interest payments
One way of doing it is by setting a reminder on your phone. You can also set an auto-debit instruction with your online banking account to make your Credit Card bill payments on a specific date after the bill is generated.
- Maintaining Low Card Utilisation Ratio
Try to avoid using the Credit Cards to their limits. If you do this on a regular basis you might increase your credit utilization ratio. An increase in this ratio will impact your credit profile in a negative manner, especially in the long run. If your credit utilization ratio jumps too high, the lenders and Issuing Banks will start to identify you as ‘credit-hungry’. Try to avoid this and aim to maintain the credit utilization at a rate of 40%
- Never Withdraw Cash from Credit Cards
This is one of the golden rules. Whenever you take out cash with the help of a Credit Card, you are not entitled to an interest-free period that comes with cash-free transactions made with a credit card. You face the onslaught of interest rate between the range of 24% to 48% per annum, from day one of the withdrawal. It is highly advisable to stick to Debit Cards for withdrawing cash for your needs, otherwise get ready to pay unnecessary interest!
- Interest-Free Period – Use It Smartly
It is essential to understand that once getting an easy accessibility to Credit Cards, you have to rope in your excessive spending and not let it get out of hand. Also, remember that Credit Cards are not a borrowing tool like Personal Loans. The interest rates on Credit Cards are relatively higher than on the Loans and with a limited free period time to pay off the outstanding amount. Use this free period, smartly!
- Don’t Let Go Of Reward Points
The great thing about Credit Cards is that they come back with huge amounts of benefits. From cash back to discounts, to even free memberships, Credit Cards provide you with cheap access to a lot of things! A watchful and intelligent user will always be on the lookout such offers and continues to save on the expenses. Even the accumulating reward points can be used to buy specific merchandise.
- Credit Card and E-Wallets?
This is another great strategy! Some of the e-wallet companies have partnered with banks to create a product where they are offering interest-free credit period for transferring funds to the e-wallets. If you combine the benefits of Credit Cards and e-wallets, you are set to improve your savings significantly.
- Credit Cards Rotation Strategy
This is one of the most tried and tested Credit Card management tactic. If you are in possession of multiple Credit Cards, use them in the rotation to keep the utilization ratio in control and safeguards your cibil score. Using this strategy, you can keep all your accounts active in the long run!
- Getting the Right Card
More than anything, evaluate your lifestyle and determine what kind of Credit Card will suit you the best. There are countless types of Credit Cards, that offer myriads of benefits and different types of rewards. Some offer benefits on fuel while others on dining. So choose wisely and pick the Credit Card that’s tailored to your needs.
- Redeeming Credit Card Reward Points
This is one of the most important factors to consider if you truly want to take advantage of the Credit Card tool. Reward points accumulate over time. They can be accessed on a variety of discounts and transactions. But here’s the catch, they have a finite validity period. After this period gets over, the reward points expire and your accumulated benefits go to waste. This redeeming period can range from anywhere from a year to three. Take note of your reward points. They are the prize for your financial discipline!
- Keeping Track of the Credit Card Statement
This is one of those things that most people do not take care of. The Credit Card Statement contains everything. From your charges to interest and even the penalties placed on you. You must always keep a regular check of this document. You cannot afford to miss any detail from this document. If there are any discrepancies in the statement, you must report this to the Credit Card Company immediately!
Using a Credit Card can be immensely rewarding if used wisely. It not only helps you save money but also improves your credit rating and credit profile. At Chqbook, our core philosophy is guarding the interest of our readers and customers. A borrower or a Credit Card holder deserves to have access to all the information! Use Chqbook’s extensive tool to research and become a smart borrower.