Tips on how to use Credit Card wisely and effectively

A credit card has become a part and parcel of life as many people are using them for shopping and other purposes as the card allows us to make purchases and pay for them later. In that sense, it's like a short-term loan. When you use a credit card to make a purchase, you're essentially using the credit card company's money. But, while using Credit Cards we should maintain discipline, or else we may end up in debt.

Hyderabad: A Credit Card is not just a means of payment, but it is a card that provides many benefits like reward points, cash back, discounts et al. Against this backdrop, it is important to decide, which credit card suits your needs. A person is eligible for a credit card based on income and credit score. While applying for the card check the amount of the card based on your eligibility. If you look for a card with a higher amount, you may get rejected. It also affects your credit score.

How to use a credit card?

How you will use the card is crucial in choosing a card. For instance, suppose you use a two-wheeler a lot. Check out a card that offers cash back on petrol and high reward points. Those who do a lot of shopping online will benefit from choosing a card that offers discounts on shopping websites and brands. Read the card terms and conditions carefully to understand how benefits such as cashback and discounts work. Only then we should use the card to avail of the benefits that are being offered by banks and financial institutions.

Maximum limit...

Make sure that there is a high limit on the Credit Cards. Banks decide the limit based on income and credit score. However, it is never advisable to use the entire card limit. It is best not to use more than 50 per cent of the limit. The remaining 50 per cent should be kept available for use in emergencies such as hospitalisation.

Based on the budget...

It is good to budget your income to spend. Similarly, there should be a plan for spending on Credit Cards. For example, when you want to buy something, if you use the card, you will get a 10 per cent discount. So, always use the cards judiciously to get maximum benefits out of them.

Maintain discipline while using Credit Cards

Some banks do not charge annual fees on cards. But, it has limitations. This benefit is provided only when a fixed amount is spent per year. Bills must be paid before the due date when using a credit card. Do not forget that the benefits offered by this card can be availed to the fullest extent only when used with discipline, says Sanjeev Moghe, President, Cards and Payments, Axis Bank.