Be Smart with Credit Cards

How to Use Credit Cards Responsibly

Many of us have pondered over the question of whether to apply for a credit card or not. We have seen credit card bills shoot up to sky high levels for some while others use it responsibly and pay their dues on time. If handled well and used responsibly, a credit card can be a worthy tool in your financial kitty. But if you have no control over your purchases and you fail to keep your credit card bills in check, a tool that could have been an asset will easily turn into a liability. So read on to find out how you can use a credit card to your advantage and not let it become a burden.

Do you actually need a credit card?

The first and foremost question to ask yourself is whether you need a credit card. A credit card can be useful for a lot of things. It helps you build a good credit score (only when you pay your bills on time), which in turn makes you more eligible for a loan. You also get reward points and cash back rewards when you use your credit card. But if you are an impulsive shopper and don’t exercise good control over your expenses, then a credit is simply not for you.

Pay your full credit card dues

One of the easiest ways to fall into the credit card trap is to make use of the so called ‘minimum payment’ option. This means that you need to pay only a minimum amount of your outstanding credit card debt, usually around 5%, while the rest rolls over to the next month. Avoid doing this like the plague! Because your credit card bill will soon hit the stratosphere and you’ll never see it coming. It is always best to pay your full amount every month and begin the new month with zero debt.

Make use of the interest-free period

Try to pay your credit card dues before the due date. If you do that, you do not have to pay any interest. Find out about the interest free period of your credit card. It is usually around 45-50 days from the start of your billing cycle. Any purchases made during this period will be interest free if you pay it off before the due date. This only works if your outstanding amount is zero.

Avoid withdrawing cash using your credit card

A credit card is meant for purchases, not for withdrawing cash. Cash withdrawal using a credit card results in an exorbitant interest right from day one up to the day you pay the amount. Also, you cannot avail of the interest free period if you withdraw cash.

Convert your dues to EMIs

In case you’re unable to pay your outstanding amount, you can ask the credit card company to convert your dues to EMIs. This will make it convenient for you to pay your dues but more importantly, the interest levied on EMIs is much lower than that of credit card dues.

So there we have it. Keep the above pointers in mind and exercise some control over your expenditure. If you do this, rest assured that your credit card will remain a handy tool in your wallet and not turn into a liability.