There's no doubt Credit cards are amazing financial tool to serve your urgent needs without having to pay immediately. Credit cards also come with rewards for spending, which lures users to spend more. It's not a bad thing if you are spending using Credit card but if you are not able to pay within the grace period you will be liable to pay interest. In this blog we will discuss 5 profitable ways to use credit card and how to use credit card smartly -
Don’t use more than 2 cards
One of the best tips to use credit cards effectively is not using multiple credit cards as it makes it difficult to track the credit card spending and makes it even more difficult to pay off the dues. One might get tempted to have multiple cards having different credit limits. But with this temptation comes unreasonable spending and high interest expense. It is advised to limit your credit cards usage to 2.
Use credit cards for cash back and discount
One of the major benefits of using Credit cards is it's rewards, discounts and cash backs. Credit cards offer multiple discounts and cash backs on their usage and one can save a lot on their expenses by using credit cards.
Even banks earn higher profits through credit cards and they are willing to offer competitive rewards to increase the usage of credit cards.
One of the profitable ways to use credit card effectively is to cut down on your expenses.
Don’t spend excessively for the rewards. Always spend within the credit limit. Overspending due to the rewards it offers is pointless.
Pay the credit card bill in grace period
The next tip to use credit card effectively is to pay the credit card balances in full within the interest free period. Interest-free period, is the time between the date of the credit card transaction and the due date of payment for the billing period. Usually 20 to 60 days is the grace period.
During this period, no interest will be charged on credit card transactions if the outstanding balance is paid in full. Also pay attention to the EMI of your credit card. If you are unable to pay your credit card bill, you can convert your credit card payment into a monthly EMI.
EMI credit cards work like mortgages or personal loans. You can liquidate your balance by paying a fixed amount of principal and interest every month. This can be an easy way to carry out your duties without too much pressure.
In the guide to How to use credit card smartly, this is an effective practice.
Dont let your dues accumulate
Credit card issuers allow users to pay a minimum of 5%, so there are no late fees. However, interest is charged on the unpaid amount. We do not recommend balancing credit card charges. This is due to the fact that credit cards charge high interest rates (36-48% per year). Once interest payments start, it is difficult to make payments in installments.
Please pay full credit card fees every month for an interest-free period. So, if you want to use credit card smartly, make sure you pay off your liablilities on time.
Build good CIBIL score
The most important tip to use credit card effectively is to build good CIBIL score. Yes it's true you credit score improves when you clear your dues on time. CIBIL is Credit Information Bureau (India) Limited and is the first credit information company is India. A high CIBIL score means that the person is eligible for a good loan agreement.
RBI requires all banks to check CIBIL scores on all credit cards and credit card applications. You can increase this score by using a credit card. A well-maintained credit card account that pays your credit card on time will help your CIBIL score so you can pay off your loan on time and maintain your existing credit card account.