With the Government of India’s push towards a digital economy, credit cards have found their way into the wallets of the common man. However, you need to use them wisely as their irresponsible usage can hurt your credit score and lead towards a debt trap. Given below are a few tips that will help in the prudent use of credit card.

Don’t swipe your card for every small purchase

Most credit card holders couldn’t resist but to swipe their cards for every little purchase. However, it must be avoided.

Note that swiping your card often paints you as a credit hungry borrower, and this can significantly dent your credit score. Stick to a budget and swipe it only when genuinely needed. Also, you must avoid utilising the full credit limit available as doing so can make it difficult to access extra credit facilities.

Pay the dues on time

This is another important consideration while using credit cards. When you swipe your card, you need to pay the amount borrowed within a specified time frame. Missing it can not only impact your credit score but also result in steep penalty and interest on the outstanding.

Being an unsecured mode of finance, interest rates on credit card outstanding are pretty high and failing to pay on time adversely affects your chances of availing credit in the future.

Don’t swipe your card at ATMs to withdraw

Swiping your credit card to withdraw money from ATMs is another mistake that must be avoided. Though credit cards offer cash advance, when you do so, there’s a significant interest that you need to pay on the cash withdrawn.

Also, unlike merchant establishments, where you get an interest-free window, the interest meter starts right from the day you withdraw. The facility for a cash advance through credit cards should be used only in case of an emergency.

Encash reward points

Spending through credit cards earn reward points which keep on accumulating. You must encash these points within 1 or 2 years.

If you keep them for too long, they lose their value. Find out if you can adjust these points against bill payments, and do so if possible.

In conclusion

While these are some effective ways to utilize your credit card better, make sure to keep card details confidential. Don’t use them to conduct transactions over unsecured networks, and inform your company at the earliest in case of fraud.

Click here to visit our personalized online advisor that gives you the financial expertise you need.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



Trending Articles

Popularly Searched Terms

Financial Advisor

Recurring Deposit vs Fixed Deposit

What is Fixed Deposit

What is a Credit Score

What is a Savings Account

Latest Articles

abc-of-personal-money
abc-of-personal-money

How Important Is It To Have Plan B To Lead A Lavish Life?

Read More
Posted on 07 May 2020
abc-of-personal-money
abc-of-personal-money

Cost for MS in USA for Indian students

Read More
Posted on 07 May 2020
abc-of-personal-money
abc-of-personal-money

Keys to Successfully Managing Personal Finance

Read More
Posted on 27 April 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image abc-of-taxes
abc-of-taxes

Points to Note While Filling Salary Details in ITR 2

Read More
Posted on 29 May 2020
image abc-of-taxes
abc-of-taxes

Want to Save Tax? Start With Understanding Your Payslip Better

Read More
Posted on 27 May 2020
image abc-of-taxes
abc-of-taxes

10 Reasons Why You May Get a Notice From The Income Tax Department

Read More
Posted on 26 May 2020