Best 5 ways to use credit card smartly

INTRODUCTION

Credit cards are one of the best financial products if it is used smartly and if it is not used smartly, they may result in a curse as well as may become a bigger liability.

In the financial year 2021 in India, there were around 63 million credit cards. Globally there are approx. 2.8 billion credit cards were being used.

The use of credit cards is increasing day by day as well as misuse, and lack of knowledge of how to use a credit card result in which user being stuck in a debt trap and he pays higher interest rates unknowingly just because he is not aware of credit card rules and regulations. There are a lot of hidden rules that credit card users are not aware of and result of which they unknowingly pay many undisclosed fees that credit card users are not aware of.

There are some smart tricks that you can use and avoid unknown traps: –

1. Use only 30 percent of your credit limit

One of the smartest ways of using a credit card is to use only 30 percent of your credit limit which is also called the credit utilization rate. Using 30 percent of your credit limit helps in maintaining good credit ratings if you utilize more than 50 percent of your credit card it will lower your cibil score and lenders will consider you a risky customer.

2. Never withdraw cash from a credit card

Withdrawing cash from a credit card may not affect your credit score but it can prove to be a costly affair because the bank charges interest on the amount you withdraw, and transaction fees, and taxes are included which may result in paying a higher amount to the credit card companies. Hence, credit card users may avoid withdrawing cash from a credit card.

SBI Bank credit card charges transaction fees of 2.5% or Rs. 500 whichever is higher.

HDFC Bank credit card charges 2.5% to 3.5% per month. Apart from this users, also pays Cash advance fees, finance charges, and ATM fees.

3. Don’t fall into the trap of paying a minimum amount

Always try to pay the full amount of a credit card within time. Paying a minimum amount may lead to paying more interest and it extends the debt of a user which may lead to falling into a debt trap. The user pays about 30 to 40% interest if he applies for a minimum payment amount.

4. Do not spend what you cannot afford

A credit card may result in a curse as well as it can become a bigger liability if it is not used smartly. Do not try to overspend on things that you don’t need, always try to make a budget for your expenses.

Simple ways to track credit card spending-:

1.  Downloading a budgeting app-budgeting app helps to keep a track of your day-to-day transaction once you start uploading expenses on the app you can view the transaction in the application. Some popular budgeting apps are the Moneycontrol app, Dhani app, Walnut app, and Paytm khata book.

2.  Use the Credit card company’s mobile app-Mobile application helps you track your day-to-day transaction as well as gives you an analysis of your transaction. Using a mobile application may lead to saving time as well as you don’t have to upload transactions by yourself. Companies that provide these services in India are CRED, Lazy pay, etc.

5. Automate credit card bills

Automating payment card bills have many benefits it helps users to avoid late payment fees which result in paying 30 to 40% interest rates, and it helps users who have many credit cards manage their payment transaction. Applying for automated credit card bills improves users’ credit ratings and protects users from falling into a debt trap. 

CONCLUSION

Credit Card provides convenience to the consumer it acts as a method of payment and a flexible credit instrument. Credit Card is a lifesaver for those who use them wisely if it is misused they act as a liability. There are a  lot of hidden charges that consumers are not aware of this blog will help credit card users to use tricks to avoid paying higher fees.