Credit cards are surely a popular payment tool, especially for young people. Based on the concept of ‘buy now, pay later’, credit cards offer the financial flexibility that hard cash doesn’t. Credit cards come in handy in a variety of financial situations, and they even offer a multitude of offers and rewards that one could avail for themselves.
But have you ever wondered whether you are actually making the most of your credit card? Here are a few ways in which you can maximise the benefits of your credit card and use it well.
7 Ways to Make the Most of Your Credit Card
1. Choose Smartly
While applying for a credit card, make sure you are well informed about the various benefits and services of the card. Do thorough research on the different products and services of various banks before choosing which credit card will help you the most. Check on the credit limits, interest rates and payment terms of the various banks. If the credit card requires you to pay joining and renewal fees, then make sure to check it against the value of services being offered before making a decision.
2. Don’t Keep Multiple Credit Cards
While credit cards offer good financial flexibility, they can also become the flag bearers of debt in your life. So it may be a good idea to keep a single credit card and utilize it well than have multiple credit cards and sink under debt. Track and manage your credit expenses to know your relationship with your credit card and look for ways of optimizing your credit transactions.
3. Spend Cautiously
Purchasing things without actually paying for them at the same instant can be quite a liberating feeling. But that’s precisely why you should be more mindful of your credit card’s expenses. Always remember that defaulting on your credit card bills can attract a late fee and an additional interest on the amount you borrowed. So keep a limit on your credit card expenses, plan your purchases and avoid indulging in impulse shopping.
4. Pay Your Credit Card Bills in Full and on Time
It is often advised that you pay your credit card bills in full and on time to avoid paying recurring interest charges. Check your credit card bill thoroughly and pay the full amount at once and clear off all debt. Ensure that you do not fall in the ‘minimum payment’ trap and avoid paying a huge interest amount later. A healthy credit activity will also help boost your credit score.
5. Track Your Credit Utilisation Ratio
A credit utilization ratio is an element used by credit reporting agencies to calculate your credit score. It is the percentage of the total available credit that is presently being availed by you. So it can keep fluctuating depending on your purchases and payments. A lower credit utilization ratio could help you improve your credit score.
6. Check Your Credit Report Regularly
A credit report is different from a credit score. A credit report is a detailed breakdown of your credit history that is usually prepared by a credit bureau. Credit reports are often referenced by banks and other institutions that lend money to determine whether you would be eligible for a financial loan. So it's a good habit to keep a check on your credit report.
7. Use Your Reward Points
And finally, don’t forget to use all the reward points that you accumulate when you manage your credit card well. Often, rewards points have an expiry date so make sure you redeem them well in advance and in regular intervals.
Using and managing a credit card is a great financial skill and once you follow these simple ways, you will be able to make better financial decisions. Remember, it is always better to be thoroughly informed before making any financial decisions.
