Here’s the ideal way to use your credit card

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Credit cards work as a best friend in case of immediate financial need. Hence, millennials typically use it quite often for almost all types of spending which eventually has increased the number of credit card disbursement. However, this easily available option can cost much more than your spending if you fail to repay the credits on time.

As using credit cards in a way is a loan,  you should use it carefully and should make the payments on time. This will not only keep you tension-free but will also put a positive impact on your credit score and would place you on a plus side in the form increase in credit limit or pre-approved loan in the future. Here are some ways you can use your credit cards smartly:

1. Choose the right credit card: Do not fall into the trap of various credit card calls and offers and should get the credit card that suits your requirements. Limit your expenditure to the places that offer good credit points. Instead of picking up multiple cards, select the best 2-3 so that you can handle them  properly. Also, select the credit limit you can pay off on time.

2. Try not to withdraw cash from a credit card: Usually, people withdraw cash from a credit card. But by withdrawing cash from a credit card, you have to pay an additional service charge of 3 to 4%.  And, you can fall into a debt trap as high interest rates that can severely affect your credit score. However, the minimum charge from such transactions range from Rs 200 to  Rs 1,000. Many experts say withdrawing cash from credit cards should be avoided.

3. Use the Reward Points effectively: As a credit card holder, you often receive e-mail and SMS that inform you about the reward points and how to redeem them. Credit card points have expiry dates. Hence, you should check you credit points from time to time and should make the best use for your purchases before they expire.

4. Clear the dues on or before time: Banks send your credit card statement after the completion of the cycle every month. “Though you get 45 days to 50 days time to clear your outstanding bill, you should pay soon after your expenditure or at least in 30 days cycle on your bill. If you fail to pay on time, you may have to pay a late payment charge of up to 60% (per annum basis). Additional costs would keep adding, including late fees and the interest would be charged on the total amount with every passing month,” explained Rishi Mehra, CEO  of Wishfin.

You can also, easily take a loan with the help of your credit card as it gives you the facility to take an unsecured loan based on the limit. However, this facility depends on how you use your credit card and what is your payment history.