Plastic money offers a number of benefits to the consumers. Earlier considered as a privilege of the affluent few, it has now become a form of currency accessible by one and all.
Available through several banks in the country with a minimal joining fee, a credit card has lent a practical approach to work around the principle of “buy now, pay later”. It has made spending easier and provides more financial freedom than cash. It is easier to carry and convenient to use.
How to use credit cards smartly
It is important to spend and act wisely when you are using credit cards. In order to make the most of the facilities offered by a bank, here are some smart tips that may help you benefit optimally from a credit card.
- Apply for a higher limit
The credit limit for every individual may be different. When you apply for a card, ask for the highest limit you are eligible for. This will entitle you to a higher eligibility to spend. In addition, a higher limit helps you maintain a higher credit score. This is because if you use only a small percentage of the credit limit, it will reflect a low credit desire on your end.
- Pay attention to the fees
The card attracts annual fees, joining fees, and renewal fees. There are also some cards that have no fees. Make sure go through the fee structure in detail and opt for a card, where the associated fee is not so high that it outweighs the benefits.
- Pay off the balance
The cards allow you to spend now and repay the amount later. This sometimes results in overspending and eventually leads to an increase in debt. It is important to pay off the complete balance within the due date; else you may be charged high rates of interest on the outstanding balance.
- Understand rewards
Do not simply use the card in order to earn reward points. It is important to understand the reward points and its implication on your spending. There are reward points for specific spending and different banks offer different rewards. Some banks offer reward points that are redeemable at particular stores. Hence, it is important to gain complete information about the reward system when applying for a card.
- Avoid using the card to withdraw cash at ATMs
Although it is easier to withdraw cash from an ATM with your credit card, avoid doing so. From the day you withdraw cash, you will be charged interest on a daily basis. In case of an emergency, when you have no other choice, you may use the card to withdraw funds, but remember to repay the balance at the earliest.
Credit cards have become a necessity nowadays, but it is important to ensure that you do not fall into a debt trap. Making prudent choices and using the card at appropriate places will make a lot of difference. Timely payment of outstanding dues is the right way to manage finances.