With changing times, people’s attitude towards money has also changed a lot. Today people have started choosing credit card as their preferred method for bill payment and it is also quite popular. Credit card has become an excellent tool to meet short-term financial needs.
A large population uses credit cards these days. Using it wisely can be the best way to improve your overall financial health by increasing your credit score.
When you use a credit card, it is always important to remember that a credit card is not free money; it is a loan.
If you know how to use credit card wisely then it is beneficial for you, otherwise if you do not know how to use it smartly then you may get into the debt trap.
We choose credit card payment method so that we can enjoy interest-free loans, multiple rewards and freedom from cash. This article is dedicated to all credit card holders with 5 important tips to make the most of your credit card.
If you follow the tips mentioned below in this article, you can maintain a good credit history which will help you in the future. You should also follow the guidelines of the respective bank to get maximum benefits from the credit card.
Table of Contents
5 Tips to use credit cards wisely
- Choose the right credit card
- Know your credit card
- Create a repayment strategy
- Pay your credit card bill before the due date
- Use your card at trusted merchants
(1) Choose the right credit card
Before using a credit card, you need to understand how to choose the best credit card based on your lifestyle needs. If the credit card is designed to meet your lifestyle needs, it will be more useful to you as a convenient financial instrument.
Today, there are dozens of credit card options available in the market to suit your various needs. You have to decide what kind of card you need based on your spending pattern and preferences.
For example – if your primary use is for everyday purchases like groceries, then look for a card option that offers maximum cashback or reward points on such categories or if you travel frequently then you can opt for a card that gives you maximum benefits on such categories, which you can convert into flight bookings at discounted prices or for free.
There are many other examples, such as shopping, medical expenses, bill payments, etc. You can choose any option that suits your specific financial needs and habits.
Choosing the right credit card for you is very important as it helps you manage your finances more effectively and efficiently.
(2) Know your credit card
Before using a credit card, the most important thing that you must keep in mind is that you must know all the important things about your card like – credit limit of the card, penalties and charges associated with the card, interest rate of the card, incentives offered on your card etc.
(3) Create a repayment strategy
The most important step in using credit cards wisely is to plan for repayment. Hence, it is important that you are smart about repayment.
It is a good idea to pay your credit card bill before the due date. Before you consider making any purchases on your credit card, you should have a detailed strategy regarding repayment.
Paying credit card bills on time helps you establish a good credit profile with the lender. This helps improve your credit score.
Your bank may offer you convenient options to pay your credit card bills. You can choose to pay your credit card bills through installments, however, this leads to higher interest payments in the long run.
Non-repayment will make you pay a high interest rate on your outstanding amount. If you miss paying your monthly bill, you will be charged high interest as well as late fees and if this continues for a long time, it will also have a negative impact on your credit score.
(4) Pay your credit card bill before the due date
If you ask me this question that what is the best time to pay credit card bill then I will always say pay your credit card bill before the due date. There are many benefits of this like –
- Paying your bills regularly and on time improves your credit profile with the bank.
- This lets you avoid paying late fees and having negative entries on your credit report.
- This can help you increase your spending limit and avail great offers on personal loans and other financial products.
(5) Use your card at trusted merchants
Credit cards are more prone to fraud than debit cards. Therefore, credit cards should only be used at trusted merchants. Whether you are shopping online or at a local store, always ensure that the merchant or retailer is an establishment that is trustworthy. Such a practice reduces the risk of your card being misused.
Bottom line,
If you use a credit card, make it a habit to set your credit card limits to avoid any unnecessary and excessive spending.
It is important to always be cautious about your credit card usage so that you keep a regular track of your credit card transactions. Keeping track of your expenses will also ensure that unexpected transactions come to your notice and you can report them to your bank immediately.
