By Raj Khosla
Every year an estimated 15 million new credit cards are issued in India. But a lot of of the new customers are unfamiliar with the functions and guidelines governing the 2-inch by3-inch piece of plastic in their wallets. This lack of awareness can lead to higher charges, missing out on rewards and even denting their credit worthiness. Here are some intelligent ideas on how to make the most of your credit card.
Choose suitable card
Banks and credit card businesses are reaching out to new buyers. But do not sign up for a new card with no checking no matter whether its functions are relevant to your spending pattern. If you use a car extensively, go for a co-branded fuel card that waives the fuel surcharge and provides rewards on spends. If you travel a lot, go for a card that provides maximum flexibility of airport lounge facilities, along with frequent flyer points that can be accumulated with no any time limit. Cards that present greater reward points for on line usage will suit persons who do a lot of digital transactions. Similarly, if you dine out frequently, choose a card that provides eye-catching discounts on dining selections.
Pay in complete and on time
A credit card is a supply of no cost credit as also the costliest borrowing alternative. Confused? If you clear credit card dues in complete 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 particularly higher price of interest on the unpaid quantity. You can roll more than the balance by paying a minimum 5% of the billed quantity, but be prepared to shell out 3-4% a month on the outstandings. It’s a very good notion to automate the payment for your credit card bill so that even if you neglect the payment deadline, your bank does not.
Get more than one particular card
If credit cards make it straightforward to invest, will not as well a lot of cards push the user into a debt trap? Right and incorrect due to the fact it depends on your spending discipline. In truth, you can handle expenditures improved. Credit card issuers tie up with retailers and service providers and more than one particular card increases your possibilities of grabbing such offers.
Maximise no cost credit period
Multiple cards also enable maximise the interest-no cost period on purchases. As a rule, use a card exactly where the billing cycle is farthest. Suppose you have two cards with billing cycles ending on the 15th and the 30th of each and every month. Use card A for buying till the 15th, and then switch to card B. Switch back to card A soon after the 30th. Used smartly, this can fetch you up to 40-45 days of interest-no cost credit. Another plus point is that you can transfer the balance from one particular card to a further if you are facing a money crunch. Most card issuers let you transfer unpaid balance and some do not even charge for the very first 1-2 months. Only, do not make balance transfer a habit due to the fact it could be the commence of a perilous descent into a debt trap.
Convert to EMIs if facing a crunch
Paying off your complete bill by the due date is absolutely the greatest point to do. But if you are facing a crunch, you can convert your outstanding dues into straightforward EMIs. The interest charged is 18-24% per year, but that nevertheless performs out improved than the 3-4% you spend per month when you roll more than the balance.
Protect your credit score
How you use your card and when you spend your bills impacts your credit score. Don’t sully your credit history by missing a due date or racking up a bill you cannot afford. Stick to a spending budget when you go buying. Work out a repayment program prior to you use your card, specially for higher-worth purchases.
In conclusion, meticulously match credit card functions with your individual usage, and retain expenditures inside your serviceable limits. Most importantly, often observe security protocols as mandated by the issuing bank.
Credit card perks
- Credit card issuers tie-up with retailers, brands and service providers. Having more than one particular card increases your possibilities of grabbing offers
- With numerous cards is that you can transfer the balance from one particular card to a further if you are facing a money crunch
- Multiple cards also enable maximise the interest-no cost period on purchases. As a rule, use a card exactly where the billing cycle is farthest
The writer is managing director, MyMoneyMantra.com