5 tips to use your credit card wisely

Posted on Wednesday, July 18th, 2018 | By IndusInd Bank

Most of us would have experienced the joy of owning a credit card for the first time. And we all know how great a financial backup a credit card can be if used in the right manner. If used smartly, a credit card helps you manage your monthly expenses. Apart from being a powerful financial tool, a credit card also brings in numerous benefits like discounts, bonus, exclusive offers, and reward points. Here are the top 5 tips and tricks to use your credit card wisely:
1. Have a proper understanding of the billing cycle of your credit card. The interest rate charged on a credit card is around 20–30% per annum. All the banks offer an interest-free credit period, which varies from bank to bank. The interest-free credit period is not calculated from the time you buy any commodity, but according to your billing cycle. For example, if your credit card bill is generated on the 20th of every month and you purchase an LED TV on the 15th, then you will only get 5 days of interest-free credit period. However, if you buy the same TV on the 21st, then it will be billed in your next cycle. So, always plan your purchase according to your billing cycle to enjoy a maximum interest-free period.

2. Think before you opt for a cash advance: Many of us are attracted by the cash advance feature of a credit card. There may be times when you would want to avail the cash advance facility, but this should be your last option. A high interest rate is charged on cash withdrawals using the credit card. Also, the interest rate on cash advance starts from the day of withdrawal and is compounded until it is paid in full. Therefore, avail this facility only during emergencies.

3. Pay the total due amount: Every credit card bill mentions two payable amounts: (a) total amount payable and (b) minimum amount payable. A new credit card owner often gets confused and pays the minimum amount due instead of the total amount. Although you have paid the minimum amount due, you will be charged an interest rate on the entire amount due. By paying the minimum amount due, you will be exempted only from late payment charges.
So, always pay the total amount due.

4. Avail maximum benefits: Credit cards have several benefits attached to them. Each transaction done through a credit card can fetch you reward points. These points can be used to get discounts while shopping at specific shops and websites. Also, there are credit cards that give you access to lounges, golf course, extra baggage allowance, cheaper insurance, etc. You can choose a credit card based on the type of transactions you make. For example, if you often dine out, choose a credit card that gets you discounts or higher reward points on dining, or if you travel a lot, opt for a credit card that fetches you air mileage and lounge access. Use your credit card judiciously while shopping and dining to earn maximum reward points.

5. Understand charges and penalties: With a long list of benefits and bonus come some charges and penalties. Before signing up for any credit card, go through the company’s charges and penalties section, to know about late payment charges, annual maintenance charges, balance transfer fees, over-limit fees, cash advance fees, and foreign transaction fees.Read and understand the fee and charges section carefully before signing the application form.
A delayed credit card payment affects your credit score.Timely payment will lead to a better credit score. Also, depending on your usage and disciplined payment, your bank may even decide to increase your credit limit. A good credit history will help you get other loans easily and at a better interest rate.

So, gather information about various credit cards available and apply for the best possible card for you depending on your usage and requirement. First-time credit card holders should be extra cautious while using their card. They tend to get tempted by offers and discounts and land up in debt. Set a monthly budget and stick to it. Continuously monitor your expenditures through mobile app or internet banking so that you do not exceed the budget.

Another important thing beginners need to take care of is the security of the credit card. Credit card theft and fraud have become common. Keep your credit card PIN and CVV number safe and do not disclose them to anyone including the bank’s personnel. Before making any online payments, check if the website is secured.
With these tips, you can make the best use of your credit card to fulfil all your needs.