Credit cards we all use; but how many of us know the smartest way to use a credit card. Smartest way! Is this a new concept? Don’t worry, it’s nothing surprising. In today’s fast running life, hectic schedules and in the race to be ahead of our friends and colleagues; we hardly have time to spare on these minute points.
Credit cards or plastic money have become an integral part of our life today; providing us the luxury of purchasing things, paying bills, booking tickets without necessarily having cash in hands. No doubt this exemption on the requirement of hard cash has made our lives simpler and helps us maintain our expenses. At the same time this luxury leads us to overspending and we finally land in a situation where it becomes difficult to manage things later.
Using a credit card, we simply see the bright side; getting happy thinking that instead of paying the whole amount of payment/purchase in cash (which we may be short of); we used our credit card and will later pay the amount in various small installments over coming months. Doing so, most of us stay ignorant to the black side of this overspending and huge credit card bills. While paying small amounts month after month and keeping the credit card bill always in five digits or so, actually hits our savings and indirectly our other affordability.
So while knowing how to use a credit card, it is important to learn how we can make the best and effective use of our credit cards.
Here are few tips to make the smartest use of a credit card:-
1. Know the credit card before accepting it. Read the whole agreement and ask the agent to explain all the details like interest charges, service charges, benefits, rewards, etc.
2. Prefer to keep only one credit card. It’s true that they help us in crunch situation, but having too many of them can more likely lead to overspending and in huge bill amounts. Keep one credit card and earn reward point on that which you can later encash.
3. Avoid using credit card to make all purchases, even on the regular items like clothes, food, rashan, etc. It is advisable to use debit card or cash wherever possible, especially for smaller or regular expenses.
4. It is advisable to clear all dues on time. Paying minimum amount increases the interest and it will further take time to clear all your debt. Interest rates are usually very high which makes us pay more than what we have expected.
5. Know the billing cycle of card and spend in such a way that you can enjoy maximum interest free period before payment time.
6. Don’t miss your payment date. Pay off your credit card bills on time and get out of the credit debt on your card(s). Banks put a lot of charges on the bill amount and this may increase your expense. In case you are aware that you may miss the date inform the bank in advance about this.
7. Understand the star mark details of credit card statement. It is important to understand the statement and charges mentioned in that .This will help you in better utilization of your card and falling prey to the extra charges.
8. Stock your purchase receipts, so that you can match them with the statement and in case of any discrepancy you can refer to them and get the corrections done.
9. Mark a limit of expense for yourself, say 30-35% of your credit card limit with regard to the amount you can comfortably pay next month. If you spend more than that, it could be difficult for you to pay the amount at once. Then you will have to consequently keep paying further to clear the amount.
10. Banks provide cash withdrawal facility with the use of credit card, but try to avoid withdrawal using your card and live your life within your limitations.
11. Be active and know about the offers on your card, floating in the market. You should have full idea of which type of card you are using, which brands offers discount on them and what other benefits you have by using it smartly.
12. Don’t offer your credit card to friends or use your card for others’ shopping, even if they promise to pay the amount as you would be unnecessarily adding to your interest amount.
13. Try to save more and in case of emergency use that fund instead of using your card.