How to Use Credit Cards Smartly?

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To make the most out of a credit card, you must know how to use a credit card smartly. The benefits of credit cards are enormous, but if used irresponsibly, they can turn out to be a nightmare in no time. Below are a few tips for using credit cards wisely.

  • Pay your credit card bill on time

The higher interest rate is the most significant challenge associated with credit cards. By paying the monthly bill of your credit card in full on time, you can avoid paying interest on your credit card. No doubt, it’s a big responsibility and needs a lot of financial discipline.

If you miss the due date, the credit card issuer will charge a late fee. Late payments will leave an impression on your credit score as well.

In the current digital era, there are many ways to pay your credit card bill without missing the due date.

  • Stop rolling over the balance

Credit card issuers allow you to make a minimum payment of your credit card balance and carry forward the rest to the next month. But they charge interest for the outstanding balance on your card. Chances are there that you may not be able to pay the entire amount in certain months due to unexpected expenses. In such circumstances, you can use this credit card benefit; but try to repay the dues as early as possible.

  • Take maximum advantage of the grace period

The grace period is the stretch between the end of the billing cycle and the due date. During the grace period, no interest will be charged from you. Hence, it’s also known as the interest-free period. But to enjoy the grace period, your credit card balance should be zero, i.e., people who pay the minimum balance and roll over the remaining amount to the next month can’t enjoy this credit card benefit.

Remember, all your purchases in a billing cycle won’t enjoy the same grace period. To maximise the advantage of the grace period, make big-ticket purchases at the beginning of the billing cycle.

  • Use cash advances only in emergencies

Withdrawing money from ATM using a credit card is known as cash advances. As cash advances come under the borrowing category, there will be no grace period for it. In short, the interest on cash advances will be calculated from the moment you make the withdrawal. If you wish to use the credit card smartly, cash advances should be the last resort for your financial needs.

However, some exceptions exist; Bajaj Finserv RBL Bank SuperCard offers you a grace period for cash advances.

  • Maintain a low credit utilisation ratio

The Credit Utilisation Ratio (CUR) shows the percentage of credit you’ve utilised from the credit limit. Credit agencies use CUR to calculate your credit score. The higher the CUR, the lower will be your credit score. Ideally, your CUR should stay below 30%.

Now a question might have popped up in your mind. What happens if my CUR is 0%? A 0% CUR implies you’re not using your credit card. In the short term, it helps you to bring down your CUR if it’s at a higher level. But, it may leave an impression on your credit score in the long haul, as most scoring models do not take 0% CUR as a good parameter. Hence, it’s better to use your credit card in a regulated way than not using it at all.

  • Customise your credit limit

The credit limit is the maximum amount you can spend using a credit card. Initially, it’s your card issuer who decides your credit limit at the time of approval based on your income, liabilities, credit score, age, etc. But if you find the credit limit beyond your repaying capacity, you can change it later.

On the other hand, if you’re not a spendthrift, you can request the card issuer to increase your credit limit. It helps to keep the CUR at a lower level and improve your credit score.

Several credit cards allow you to spend beyond your credit limit and charge a fee for the same, called the over-limit fee. Remember, every time you exhaust your credit limit, your CUR goes beyond 100%, and your credit score dips slightly. And if you do it often, then its impact on your credit score will be significant.

  • Check your statement periodically

You can check the statement of your credit card online. A periodical checking is a must, as it helps to reduce overspending and also to make sure that no fraudulent activities are happening in your account.

  • Stop running behind extra rewards and promotional offers

Credit card companies come up with promotional offers and additional reward points now and then. Don’t get lured with these credit card benefits. Buy only those products that you need. Your aim of holding a credit card should be building a good credit history, not satisfying your wants.

  • Understand various costs associated with the credit card

Various types of fees are associated with credit cards. Hence, before applying for one, understand each of them correctly. You should check a few charges before deciding on a credit card: late fee, joining fee, annual fee, renewal fee, charges on cash advance, etc. Many credit card issuers offer you a waiver on certain charges if your annual transactions are beyond a particular limit. So, learn how to use the credit card wisely before applying for it.

  • Report soon in case of a credit card theft

If your credit card goes missing or is stolen, report it immediately to the issuing authorities. They will take immediate action to inactivate the card. Otherwise, any unauthorised person may use the card, and you’ll be obliged to repay the amount.

Summary

If used wisely, you can maximise the credit card benefits and save money. Bajaj Finserv RBL Bank SuperCard is packed with the benefits of four types of cards to meet your financial requirements quickly.

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