7 Tips to Use a Credit Card Wisely

The millennials these days have opted for a better way to fulfill their needs and enhance their financial status. And this better way is to use credit cards. From food items to grocery shopping, e-commerce payments, and online bookings, credit card has become their go-to payment option. Not only millennials but it has become every person’s first choice to use a credit card for payments because of the offers and rewards these cards offer.

Just in a way where they provide offers and rewards, they attract a lot of penalties as well in the course of non-payment or delayed payment. Improper use of credit cards can affect our financial position and CIBIL score negatively. If proper planning isn’t done before the use of credit cards, they will increase our debt burden.

Therefore, it is important for us to understand the ways to use a credit card in a manner that we are able to enjoy the rewards they offer but we do not have to bear the debt burden. Now let us discuss the tips and tricks that we can keep in mind before using a credit card –

1. Choose a credit card based on your needs

Select a credit card that best suits your needs. There are a variety of credit cards in the market. You should pick the one that is apt for your day-to-day necessities. If you are more intended to spend on traveling, pick the credit card that offers amazing deals related to traveling, like deals on hotel bookings, flight bookings, etc. But if you are more inclined towards spending on daily needs, then you should choose a card that has collaborations with the supermarkets or merchants in the market. In this way, you will be able to make use of the credit card in a better way.

2. Set a credit limit for yourself

Now that you have opted for a credit card of your choice, you should set a credit limit for yourself that will enable you to spend within a specified limit. The generation today believes in the ideology of buy now and pay later and starts spending blindly. Although the credit limit of the card is pre-decided you should impose a limit on yourself as well. Try to exhaust less than 25% of your available credit limit as this will help you in easy repayment and you will not be under excessive debt. This will help you to remain in a stabilized financial position.

Also Read: Buy Now Pay Later Vs Credit Card: Which Option Is Best?

3. Pay off the bills on time and in full

Just like we pay any other installment on time, we need to pay credit cards payments as well on time. Delayed payments will fetch penalties and charges towards them which in turn would increase our debt. Non-payment of bills on time would lead to a negative effect on your CIBIL score. Also, the credit companies generally ask for 10% of the total amount due as minimum payment. However, just paying the minimum amount would free us from the late payment charges but burden us with pending debt and financing charges. Therefore, to get rid of all this, make sure to make the full payment of the billed amount in time.

4. No cash should be withdrawn from a credit card

A credit card is not only used for online shopping and payments but it also has a feature that enables us to withdraw cash from a credit card. Though the use of credit cards for the purpose of withdrawing cash is not as popular as that of debit cards because withdrawal of cash from a credit card is generally treated as taking a loan from a bank which is at a very high rate. Therefore, using a credit card for making online payments is better than using it for the purpose of cash withdrawal. High rates will be charged upon withdrawing cash from a credit card which will increase the individual’s debt burden. But if you are in a position of cash crunch, then breaking a fixed deposit or opting for a personal loan would be a better option than withdrawing cash from a credit card.

Lean here : Things To Know Before Using The Cash Advance Facility On Credit Cards

5. Usage of cashback/ reward points feature  

We had opted for a credit card because of the features, benefits, and cashback options that are available on the cards. What will be the use if we are endlessly spending through credit cards but not taking the advantage of the cashback and reward points offers that are available on them. These offers can be really helpful in cutting down the monthly expenses. By using these offers you get reward points or real value back in your account while you are dining in a restaurant or shopping in a supermarket or making some online payment or purchasing some appliances.

6. Segregate the expenses on different credit cards

By this, it is meant that there are ample of credit cards in the market and instead of opting for one card and making all the purchases through that card, we can opt for cards according to our spending needs. As for purchasing groceries, we can opt for a card that has deals on grocery shopping. Similarly, if we are fond of online shopping, we can go for a card that has various offers for shopping through e-commerce websites. In this way, the total expenses will be split across different cards and you would not face the burden to pay a hefty amount on a single day.

7. Awareness of credit card fees

After you have opted for the credit card that best suits you, you should also be aware of the charges or costs that a card carries with itself. Credit card fees include its annual fee, fee for late payment of bills, etc. You should be well aware of the charges that appear on the card statement before paying the amount due.

Bottom Line

These are a few tips that can help you in using your credit card wisely. The most important thing is to plan your expenses and credit limit before blindly spending through a credit card. A credit card should not be treated as an extra income and should be used very carefully. If you are able to manage these things, you will never be burdened with debts.