ccredit cards have become one of the most essential and handy financial tools in India. Starting from buying a burger to booking air tickets and more, people prefer these cards considering their benefits, security features, and convenience. If you’re planning to apply for one, the foremost step is to understand what is a credit card, and then, how to use it.
What is a credit card?
It’s typically a wallet-sized payment card issued by a lending company to meet short-term financial obligations. Here, the cardholder borrows funds from the lender against a line of credit instead of drawing it from his savings account. This utilized amount needs to be paid off every month within a given due date.
Defining further, credit cards enable a person to pay for purchases on credit instead of cash at the POS. Again, he can buy products or services of high value and repay it in smaller amounts as easy EMIs conveniently.
Payment of credit cards
Cardholders receive statements every month which reflect all their purchases, EMIs, fees and charges, summing up as the total amount due. They need to clear these dues within an interest-free period of 20 to 30 days from the billing date.
If a cardholder fails to pay off the outstanding amount on time, he attracts interest charges along with penalties, hampering his credit history as a defaulter. Contrarily, timely bill payments can enhance the CIBIL score significantly, making him creditworthy for availing credits in the future.
Undoubtedly, credit cards offer flexibility in covering certain unexpected expenses but using those irresponsibly can push the user into a financial mess. Therefore, understanding how to use a credit card is essential.
5 smart ways to use a credit card
1. Ensuring not to default on bill payments
As mentioned, users should make credit card payments on time every month to avoid levying hefty interests or penalty charges. They can pay via internet banking, NEFT, etc. or go for offline modes – cheque or cash. In case they tend to forget, they can opt for auto-debit option.
2. Monitoring expenditure habits constantly
It’s quite easy to end in debts if you spend more than what you can repay. So, as a cardholder, you should monitor your spending habits for better financial management. The credit card statement is the best thing to track this.
3. Always try to pay the total amount due
Credit card statements usually reflect two payments – the total amount due and the minimum amount due. While the total amount due is the full amount due including all the charges and fees, the minimum amount due is the amount which you can pay to avoid late payments and interests if you don’t have sufficient cash for the total due.
However, paying the minimum amount can hurt your credit score and also accumulate hard-to-clear debts in the long run. So, it’s advisable to pay the complete outstanding amount always.
4. Review your statements every month
Examine the credit card statements you receive every month to ensure there’s no error or unauthorized entry in it. In case of any discrepancy, do report to your card issuing company at the earliest before making the payment.
This habit also helps keep a check on your spending behavior and help you limit your expenses wherever necessary.
5. Keep the credit utilization below 30%
Credit utilization ratio refers to the outstanding due compared to the credit limit of a card. It is an essential indicator of how credit-hungry you are as a borrower. Hence, try to keep this ratio below 30% to improve your CIBIL score and creditworthiness; otherwise, you may appear credit hungry to lenders.
These are some of the ways how to use a credit cards sensibly and enjoy all its features and benefits to the best. Look for the top credit cards like Bajaj Finserv RBL Bank SuperCard tailored to meet your financial behavior and requirements. More specifically, you can choose from the 6 exclusive variants of SuperCard’s coming with attractive features.
Either fill up an online application form to apply for a credit card or avail pre-approved offers. Being one of the leading NBFCs in India, Bajaj Finserv provides pre-approved offers for existing clients on their credit cards, home loans, business loans, personal loans and a plethora of financial products. Such schemes simplify the entire process of availing credit cards or loans and save more time. You can check your pre-approved offer instantly by providing details like name, phone no., etc.
So, understand the ways of using a credit card thoroughly to avoid unauthorized payments, debts or high interests. Responsibly utilizing the card can bring you multiple benefits like attractive discounts, coupons, reward points, complimentary airport lounge access, fuel surcharge waiver and more.