Credit card can be the most rewarding financial tool if used with proper knowledge.
Unfortunately, the usage of credit cards is looked under a negative eye due to a lot of myths and misconceptions.
Proper information, a track of the due date of the monthly payments, and some market research will help you to gain several benefits. Also, a Credit card helps you to avoid carrying cash & saves you time while earning reward points for you.
So let’s dive into several usages of a credit card.
What is a credit card?
While it looks exactly like a debit card, a credit card lets you borrow the preapproved credit limit while making purchases.
Unlike a debit card where the amount is deducted from your bank account, the credit card issuer provides the balance to make the purchase.
Of course, there will be interest charges, billing period, minimum payment period which we will learn eventually in this article.
How does a credit card work?
You basically use the company or bank’s money to pay your bills & purchases. And you have to pay back with or without interest as in the agreement.
As you add your purchases to your card, available credit shrinks, but as you pay the credit card company’s money back, you free up available credit again.
Your card company sends you a statement every month detailing all your activity, your balance in the credit card account, minimum payment, and the due date for your credit card payments.
A credit card can be used to buy online and offline. Every time you make any purchase using a credit card, the details are sent to the merchant and the cardholder. Your bank will verify your information and can authorize or decline the transaction.
How do I use a credit card?
Credit cards are easy to use in stores and online shopping.
Chip-enabled credit cards with a WIFI facility will allow you to make purchases easily. When you are shopping online, you just need to process the personal data and save it for future purchases from the online account.
You have to use credit cards in a way that will help your credit score, while not costing you more than necessary. In this way, you will improve your credit rating as well as your credit limit and avoid paying interest and other fees.
Unlike debit cards, you do not need to depend on the balance in your bank account, credit cards will facilitate your transaction instantly in return for interest rates that come with an interest free period and an annual fee.
To avoid paying interest & late fee, you should adopt simple habits to make the right use of credit cards. Follow these tips on how to use a credit card smartly.
Read about: Credit Score
Credit Cards Uses and the Benefits That You Can Enjoy
If you have a decent credit score along with a threshold income, then you can easily enjoy the various benefits that come along with a credit card. You can avail several discounts on every transaction that you make with a credit card. Lets us know how to can gain benefits using a credit card.
Build a Good Credit Score
A good credit score helps to apply for a loan and other bank-related uses. With the appropriate use of credit card, you can easily build good credit health for your credit scores. Every bank offers two types of credit cards that you can opt for are unsecured and secured.
Unsecured credit cards are granted by the bank based upon your credit utilization ratio and your spending. You use these cards for different purposes to enjoy several benefits that the bank offers. Your personal finance history comes into play while deciding your credit limit.
Whereas if you want to opt for secured credit cards, then you have to deposit some amount. The credit card company will often impose less strict rules than the other card. The amount you deposit for secured cards is also considered a credit limit. However, you can also ask for a refund of your deposited amount from the bank later.
Earn Rewards Points
There are several rewards and cashback that you can earn from your credit card spending. From dining, shopping, traveling, hotel booking, airport lounges, you get it all.
You also get a waiver and vouchers if you spend a certain amount with a credit card. But remember that you don’t exceed the credit limit. Otherwise, you will also have to pay over-limit charges as a penalty.
Tips and Tricks To Use Credit Card Efficiently
If you think that using a credit card will lead to a huge debt, then you are wrong. You just need to follow some tips to help you maintain a certain balance. To know more about the Tips and Tricks to use Credit Card, read below further-
Maintain a Significant Budget
Credit Cards are the best way to avail of discounts and purchases to avail throughout the years. But, it is very important to maintain a strict budget so that you can pay off your debts at the end of the month. So you need to be aware that you are not exceeding the credit limit and avoid any over-limit penalty.
Avoid Using Various Cards
One of the common mistakes we make is using different credit cards. It makes the process of checking the data more difficult. One thing which you can do is use a specific card for specific purchases like one for shopping, one for debts, etc. However, it is better to use a single credit card at once.
Monitor Your Purchases
If you wan to avoid any mistake in your credit card bill payment, then it is important to monitor your purchases. Having a thorough know-how about your card balance will let you understand that you are using the card efficiently.
Pay Your EMIs and Ongoing Debts
As you know that credit card payment history affects your credit score, it’s best to pay your monthly bills & EMIs regularly. In this way, it becomes easier to maintain credit card debt.
Also, you can transfer money using credit cards. But the companies charge hefty interest if you don’t pay your debts on time.
You need to check the credit card balances & interest free period before you transfer money using the credit card.
Check your Credit card Statement
One of the easiest steps to monitor your credit card purchases is checking your billing statement. It will help to understand the credit history and you will monitor your credit usage.
Now it has become easier to check your card statement. You just need to visit the official website of your credit card company and log in with your registered ID and password. Or, you can also visit the nearest branch of the company.
Avail Various Discounts and Cashbacks
One of the main benefits you can get is the reward points and cashbacks from the credit card. You can avail of huge cashback, discounts, dining and shopping benefits, etc.
But, remember that you must not spend too much with your credit card.
Pay Your Bills On Time
It is important to pay your dues of credit card during the interest-free period. Otherwise, you will have to face severe problems. If you really had some problems, you can ask for a grace period from the bank. Otherwise, it can lead to severe consequences.
If you have a habit of forgetting to pay your bills, then you can switch on automatic payments to get your bills paid on time.
Maintain a Good Credit Score
You can easily increase your credit scores by making transactions using credit cards. There are several factors that affect the CBIL Score (Credit Information Bureau India Limited) that you can increase on time. The CBIL Score determines that you have always paid your dues and on time. As a result, you will increase the chances of getting a loan in the future.
How to Apply for Credit Cards?
If you want to enjoy a luxurious lifestyle and enjoy several discounts, then a credit card is a great option. You can visit any renowned credit card company or bank that provides decent credit card limits and easy payment options. Also, you need to the existing eligibility criteria set by the particular banks.
Before applying, visit: Compare credit card benefits
Frequently Asked Questions
These are the frequently asked questions that can solve confusion regarding credit cards-
How do beginners use credit cards?
There is no certain rule to use a credit card for an experienced or a beginner. You can avail of different vouchers, discounts, and other benefits using the card. But one thing you need to keep in mind that you should always monitor your purchases to pay your dues on time.
What should you not use your credit card for?
if you want to use a credit card only for rewards and cashbacks, then you should not use it . As a result, you will spend more than your assigned credit card limit. The bank will also charge you with legitimate interest for exceeding the limit as well.
Should I use my card for everything?
No, you should not use your credit card for everything. It is best to use a credit card for the things that you really need. Unnecessary spending can lead to over limit penalties.
What are some strategies for using a credit card?
Some strategies through which you can increase your credit limit is by tracking your purchase, avoid using too many credit cards, rewards program and many more.
Do you have to put money on credit a card?
There are two types of credit cards for which you can apply for- Unsecured cards and Secured cards. If you want to have a secured credit card, then you can put money. The deposited amount will also be your credit limit.
What is the fastest way to raise your credit score?
If you want to raise your credit score, then it is best to pay your credit card dues on time. For that, you can switch on the auto-payment methods for timely payment.