Timely credit card payments key to your higher credit score

In the era of cashless transactions, credit cards come handy for us in day to day purchases. Banks are competing to issue these cards. They are approaching even newly joined employees and those having accounts in their branches but do not have credit cards. In such times, a new credit card holder needs to follow safety tips.

Hyderabad: Banks collect various fees while issuing credit cards, but you have to carefully select only those that exempt you from such fees. Banks take annual and statement fee from customers. A separate fee is collected to issue a new card in place of a lost one. All such fees would become a huge burden on us if we don't take necessary precautions. Those taking cards should opt for such cards that come with zero or lesser fees.

A new card holder should be very cautious regarding timely payment of credit card bills so as to avoid high interest. Usually, interest-free credit is given up to 50 days. It is decided based on your card billing cycle. The whole bill should be paid in full. Any delay will incur fine in addition to interest. Every credit card has maximum credit limit, which has to be adhered to during a particular billing cycle. This limit is determined based on card holder's credit score, payments history, income, credit utilisation ratio, etc. New card holders usually have a lower limit. As they pay bills regularly, the maximum credit limit will be increased step by step.

Many card holders do not pay total bill but just clear only the minimum payable amount in monthly bill, which comes to just 5 percent of total bill. If minimum amount is paid, it will help keep the card active. But, we should not forget that the banks will collect interest on the remaining outstanding. It is always better to clear total bill within stipulated time or deadline. In case of a big purchase, it should be converted into EMI to avoid heavy fines and interest.

Upon receiving a credit card bill, you should take a keen look at it. You should check whether all your purchases are reflected properly or not in the card statement. Check if there are fines or collection of interest. Any lapse in the statement should be taken to the notice of the credit card company. Check card billing dates. If your card billing cycle ends on 10th day in a month, new billing cycle begins on 11th, the next day. The 50 day interest-free period will be helpful only for purchases made in the beginning of billing cycle. As end of billing cycle draws near, this period decreases.

Credit card holders should keep a watch on rewards, cash back offers, etc. Discounts will be available for some items purchased using reward points. Such discounts are given also for travel and hotel bookings. Many advantages can be availed in cash back offers. While making card purchases, all these things should be kept in mind. Money can be drawn from ATM by using credit cards but this will attract up to 3.5 percent monthly interest.