Nowadays, people find it difficult to manage their expenses without a credit card as it has become an essential part of our lives. It is because of the purchasing power and all the convenience that credit cards provide. One of the biggest advantages of credit cards is that they allow you to make big purchases without having sufficient money in your pocket and you can pay later for it in Easy monthly installments.
But, in order to maintain a good credit score and maximize their savings and rewards, there are a lot of things that need to be kept in mind by cardholders before making a large purchase using their credit card. From making bill payments on time to using credit card reward points at the right time, there are a lot of important factors that you should consider. This article will help you understand how you can prepare your credit card for your next big purchase before you finally go for it:
Steps To Follow Before Making a Big Purchase On Your Credit Card
Making a large purchase has been an easier task with credit cards, however, you should keep a lot of things in mind before spending a large amount on your credit card. All important steps you must follow before making a big purchase are mentioned below:
Pay Off Your Bills On Time
If you are planning to make a big purchase using your credit card, make sure that you have cleared all the previous dues. It is because an outstanding balance will not only attract unnecessary charges like late fees, interest rates, etc, but it will also affect your credit limit as you will not have your entire credit limit left to spend. Moreover, defaulting payments, again and again, will make card issuers consider you as a risky borrower and they might even reduce your credit limit. In order to make a big purchase, it is essential to have a good credit limit as spending the full limit or more than your credit limit will not be a good idea at all. So, just try paying all your outstanding amounts before you make a large purchase using your credit card.
Request a Higher Credit Limit
If your credit limit is not sufficiently high, you should try to get a higher credit limit before you make a big purchase using your credit card. Your card issuer will definitely accept your request if you have been a responsible user without any payment defaults for a long time. And if your card issuer isn’t increasing your credit limit, you should try getting another card with a higher limit. This is an essential thing to keep in mind because spending more than 30% of your credit limit affects your credit score badly. So, you should check whether 30% of your credit limit is sufficient for your purchase or not.
For example, if you are planning to purchase a laptop worth Rs. 50,000 with your credit card, your credit limit should ideally be above Rs. 1.5 lakhs. If your credit limit is lower than Rs. 1.5 lakhs, you should try getting it improved so that your credit score doesn’t go down.
Keep Checking For Discount Offers
Card issuers keep launching new discount offers for their credit cardholders from time to time. These offers can be of different types, such as discount offers, accelerated rewards offers, cashback offers, gift voucher offers, etc. The best offers are generally launched during the festive season, so if your purchase is not so urgent, you should try waiting for the right time, i.e, for an offer that can help you save at least some amount on your purchase. Even if you are getting accelerated rewards or cashback, you should go for the offer as these rewards will help you save on your upcoming purchases.
Use Your Reward Points
If you have earned a good number of reward points so far, the best time to use them is when you have to make a large purchase. You can also check your respective card issuer’s rewards portal to check if you can purchase some vouchers using your Reward Points to get a discount on your purchase. For example, suppose you have collected 10,000 Reward Points so far and the value of each point is equivalent to Re. 0.25. Now, if you are going to purchase a laptop worth Rs. 50,000, you can save Rs. 2,500 on your purchase by using your credit card Reward Points. Also, if there is a gift voucher worth 10,000 Reward Points, which is offering Rs. 3,500 off on that particular laptop brand, you should definitely go with the gift voucher as you can save additional Rs. 1,000 using the same number of Reward Points. This is how you can use your credit card Reward Points wisely for maximum benefit.
All the above-mentioned points must be considered before you go for a really large purchase on your credit card. However, there are also some other factors that may affect your decision, such as the interest rate on EMIs on your credit card. If it’s too high, you should try getting another card that offers no-cost EMI or EMIs at lower interest rates. Credit Cards are always your best friend as long as you use them responsibly, but they can also become your worst enemy when used in an improper manner.