New Delhi: Credit cards allow users to purchase goods and services, the money for which can be returned afterward. While it offers great convenience, lack of awareness can lead to high charges, missing out on benefits, and even denting their creditworthiness. Here are some smart tips on how to make the most of your credit card.
1.Choosing the right credit card
Picking the right credit card that works for you is the first step in maximising your card’s benefits. However, this is easier said than done. With dozens of credit cards on the market, how do you pick the right one? Before choosing a credit card, make sure that you understand all its benefits and features. If you already own a card, visit the card issuer’s site to see all the rewards, loyalty points, and other offers on the credit card.
2.Pay in full and on time
A credit card is a source of free credit as also the costliest borrowing option. Confused? If you clear credit card dues in full and as per schedule, there is no charge on the credit extended by the bank. However, if you miss the due date, you will not only be slapped with a penalty, but also be charged an extremely high rate of interest on the unpaid amount. You can rollover the balance by paying a minimum of 5% of the billed amount but be ready to shell out 3-4% a month on the outstanding. It’s a good idea to automate the payment for your credit card bill so that even if you forget the payment deadline, your bank doesn’t.
3.Choose the right rewards
In order to maximise the use of credit cards, one should sign-up for a card with reward points that can fuel other interests, wants or needs in life.
4.Redeem your Reward Points before the expiry
You have used your card smartly and accumulated tons of reward points. The next step is to ensure that you redeem the reward points before they expire. A large number of credit card users do not track their reward points regularly, letting them expire. This is a failed opportunity. So, make sure to monitor your loyalty account periodically and use the reward points before they expire.
5.Get more than one card
If credit cards make it easy to spend, won’t too many cards push the user into a debt trap? Right and wrong because it depends on your spending discipline. In fact, you can manage expenses better. Credit card issuers tie-up with retailers and service providers and more than one card increases your chances of grabbing such deals.
6.Convert credit card outstanding to EMI
Some credit card companies allow you to convert the outstanding on the card to equated monthly instalments at a rate that is much lower than the rate that you would have paid if you have missed the due date. It may be noted that your bank will charge a processing fee between 1-2% to convert the outstanding to EMI.
7.Be mindful of how usage may impact the credit score
One should be very careful about running up large balances on a single credit card and be very mindful of utilization percentage, which is the ratio of total credit outstanding to the total credit limit on the card. High utilisation percentage on any single card could be detrimental to one’s credit score. The best option is to have a bouquet of 3-4 credit cards so that users can spread their purchase across multiple cards which will aid in keeping the utilization percentage low.