How to Use Credit Cards Wisely?

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The timing of credit card bills is important. It affects your credit score. It can maintain your credit score and prevent you from unnecessary interest charges. To get the benefit of this, follow the steps:

• Try to pay the full amount of the bill before the due date.
• If you pay only the minimum amount, interest will be charged on the remaining balance.
• You can set up auto debit or payment reminders. This way you will not miss the due date. 

2. Keep your credit utilisation below 30%

Your credit utilisation ratio highly affects your credit score. If you spend more than 30% of your credit card limit, there is a chance of reducing your credit score. Because when you use a lower credit card, it shows you are behaving responsibly. If your credit score is high, lenders are more likely to give you a loan.

How to Keep Your Credit Utilisation Ratio Low:

• Pay your credit card bills before the due date.
• Make two or more payments monthly.
• Do not use a credit card for every need.

3. Use only what you can repay

It's very important to know how much money you can repay. You should use only the amount that you can repay. Instead of using credit cards alone, you can use debit cards and cash. 

Why is it important?

• If you spend the amount you have the capacity to repay on time, you will not face any interest or late charges.
• If you pay bills on time, you don't have to pay a large amount next month.
• It helps you maintain a good CIBIL score.

How to follow:

• Always check your account before spending.
• Pay credit card bills on time.
• Set monthly reminders or Autopay.
• Avoid impulse purchases.

Your credit card is for payment; it is not an income. So you should be careful with spending.

4. Know your billing cycle

You can avoid late fees, higher interest, and a lower credit score just by knowing about your billing cycle. 

Important things to remember:

These are the important terms that you should know for checking your billing cycle.

How to Use Your Billing Cycle Wisely:

• Pay your bills before the due date 
• You can make large purchases just after statement generation. 
• Pay the outstanding balance before statement generation. This way you can keep credit utilisation low.
• Choose the date that comes after your salary date.

When you understand the billing cycle, you can pay on time and avoid unnecessary charges. You can manage your expenses effectively and maintain a good CIBIL score. 

5. Check your credit card statement regularly

If you want to track your spending, identify errors, and protect yourself from fraud, you should check statements regularly. 

What should you check?

• You should check for unauthorised transactions.
• Check if the same transaction has been charged more than once.

How does it help?:

• By checking statements regularly, you can detect fraud.
• You can track your spending and plan finances.
• You avoid unnecessary charges.
• It helps you keep a healthy credit profile.

Even if you are using the auto-pay option for bill payments, you should still check statements regularly. 

Use reward points and card benefits

Many credit cards offer reward points, cashback, discounts, and other benefits on eligible purchases. You can use these and save money. 

How to get benefits:

• Redeem your reward points regularly and use them for cashback, shopping vouchers, travel bookings, or other available rewards before they expire.
• Check your card benefits.
• Check special offers.

Reward points and offers are valuable only if you are using your credit card responsibly. Try to spend within your budget. 

6. Convert large purchases into EMIs (if needed)

If you are purchasing something valuable, try to buy it on Equated Monthly Installments (EMIs). Then you don't have to pay the full amount at once. 

How should you go for EMI?

• If there is an option like no-cost EMI, you can go for it. Here you don't need to pay extra interest.
• Check the processing fee before converting your purchase into an EMI.
• Select a shorter EMI tenure like 3 to 6 months.

When Should You Avoid EMIs?

• If the product is luxurious and beyond your budget.
• The full purchase amount reduces your available credit limit until the EMI is repaid.
• Never miss EMIs. 

You should use EMI only for big purchases and pay EMIs on time. 

Use your card only at trusted merchants

You should always use a trusted website and store. It protects your personal and financial information from fraud.

How to stay safe?:

• You should always shop from a website that has "https://" and a padlock icon in the address.
• Check reviews before buying something from a new website.
• You should avoid making payments via public Wi-Fi.
• You should be careful while using ATMs or card machines.

Never share your CVV, PIN, OTP, or card details with anyone.

Conclusion 

Your credit card is one of those things that highly affects your CIBIL report. If your CIBIL score isn't good, you face problems in getting a loan in the future. Just having a credit card isn't enough. You should use it responsibly so that your CIBIL score will be on track. To use a credit card responsibly, you should pay bills on time, keep your credit utilisation below 30%, understand your billing cycle, and spend only what you can comfortably repay. 

Moreover, it is important to check your credit statements and reward points regularly. Also, try to use credit cards only on trusted websites and stores to protect your financial information. When you use a credit card responsibly, it not only improves your financial discipline but also increases your chances of getting loans too. For more such information, stay connected with Loansjagat.

Frequently asked questions 

1. How can I use a credit card wisely?

To use your credit card wisely, you should pay EMIs and bills on time. You should check the billing cycle and follow it. You should always use a credit card only with a trusted merchant. 

2. What is the ideal credit utilisation ratio?

Ideal credit utilisation should be below 30% of your credit card limit. When you use a high amount via credit card, it indicates that you are not responsible for your spending, and it can affect your credit score. That's why using a minimum credit card is advisable. 

3. Should I pay my credit card bill in full?

Yes, you should always pay your credit card bills in full. When you pay half the bill, your remaining balance is interestable, so it is better to pay in full to avoid more interest. 

4. Can using a credit card improve my CIBIL score?

Just using a credit card won't improve your CIBIL score. It is important to use it responsibly. 

5. What should I avoid while using a credit card?

You should avoid using credit cards on any random website or store. Also, do not use credit cards on unknown public Wi-Fi. 

6. Is it safe to use a credit card for online shopping?

Yes but you should be extra careful while doing it. Never share your OTP or CVV. Also, first check website reviews and then use it. 

7. Should I use my full credit limit every month?

You should not use the full credit limit every month. You should use only up to 30% of your credit card limit. It shows your lender that you spend responsibly. Also, it improves your CIBIL score.

8. How many credit cards should I have?

There is no limit on credit card use but you should use them responsibly. Ideally you can have two or three credit cards. These cards can help you build a good credit history and make payment easier. 

10. How can I avoid credit card debt?

Spend within your budget and always pay your bills on time.