Best ways to use your credit card wisely
While a credit card offers scores of benefits to you, it’s important to use it cautiously. This will allow you to make the most of the features without risking financial stability. If you’re a first-time credit card user, start by understanding how credit cards work and then keep these 5 points in mind.
Monitor your spending so that use only as much as you can repay
To begin with, make sure that you keep tabs on how much you spend. Since credit cards involve using borrowed finances, you may not realise how much you’re spending each time you swipe. Thus, monitor your usage in the initial months and ensure that your credit utilisation ratio is low. This is important as a high ratio negatively affects your credit score, and can cause you to spend more than you can afford to repay.
Use the card for fixed expenses and increase your credit score
Managing credit wisely is not only about avoiding debt, but also about how you can use it to your advantage. For example, pay utility bills and rent, expenses that you have to pay come what may, via online credit card payment options. This includes electricity bills, water bills, or even a DTH connection cost. By making these fixed, monthly payments through your credit card you can increase your credit score, avoid overspending and make use of cashback and other rewards.
Pay more than just the minimum outstanding amount
At the end of your billing cycle, the issuer will generate a bill for the month and give you the option of paying either the entire amount or just a minimum amount. The latter is a small fraction of the total. While this will suffice to keep your credit card active, you will have to pay steep interest on the unpaid amount. Moreover, if you do not clear this entire amount, the interest you have incurred will be added to your dues for the following month and you will be charged interest on this new, increased total.
Use the grace period to the fullest
By making your purchases at the start of your billing cycle, you benefit from the largest number of interest-free days. Consider that your billing cycle is set for the 5th of every month with a 14-day interest-free period. This means that by the 19th of every month, you have to clear the bill to avoid interest. If you make a purchase on the 10th of the month, you have approximately 39 interest-free days. However, if you make your purchase on the 30th of the month, then you have just 19 interest-free days.
Redeem reward points to make big spends economical
Every time you use your credit card you get a chance to earn reward points. Once you accumulate these points, you can use them to pay for other expensive products and services. For example, if you own a Bajaj Finserv RBL Bank SuperCard, you can redeem your points for flight tickets and hotel accommodation to make travel much more affordable.
Incidentally, this card also offers the features of the 4 types of credit cards rolled into one. You can use it to obtain a 90-day interest-free personal loan, 50-day interest-free cash withdrawals at ATMs, and can even Use Credit Cardsconvert purchases exceeding Rs.3,000 into EMIs. By using it frequently, you can save around Rs.55,000 in a single year. Your expenses reduce further when you factor in the deals and discounts that SuperCard members are privy to.
Best of all, to apply for a credit card just check your pre-approved offer from Bajaj Finserv. This gives you access to customised credit card deals and instant approval.