How to Use Credit Card Sensibly

How to use  Credit CardIn our times, credit card and debit card are almost a must and a great convenience for making payment, they can be very expensive also if not used vigilantly.

We share herewith some tips on how to use credit card sensibly. Follow these tips carefully and enjoy a great convenient payment and money transfer tool in your hands. Also you may like to read: 

Choose the right card wisely

When selecting a credit card, do keep in mind that all cards are not the same products. Based on your needs, carefully compare different cards based on their terms. To be specific, you should consider the following:

The annual percentage rate (APR): This is the amount of interest you one will be required to pay if one does not pay the full balance each month.

Fees and other charges – The credit card companies earn money by charging you annual fees, late payments charges, balance transfer fees, cash advance fees, over the limit fees, etc. Therefore, go in for the terms which are most favourable for you.

Credit limits: If you are a new user or low vale user or you have not very high credit limit then apply for a low limit card only so that you are not tempted to utilize more credit than you can reasonably afford.

Need: If you are a business person or an entrepreneur then you may need to charge business expenses to a credit card. In that case, it makes sense to have a separate credit card that you only use for business purchases. This helps to keep your finances organized, while maintaining an easy distinction between your business and personal expenses. Of course, it does not have to be a business credit card – especially if your transaction values are small.

Now that you know how to select a credit card wisely, find out how to pick the right credit card for your needs!

Check the basic details

When you receive your credit card, first thing you should check is the basic details such as your name, address, contact details and the Bank (if applicable). This information is taken from the application form you filled and submitted to the Bank or the Credit Card Company such as Master Card or Visa Card or their associate / partners.

In case, there is spelling mistake or the contact details are incorrect, immediately contact the credit card company and get it rectified.

Secondly, check if you have received the same product which you have applied. For example, there could be different products such as Silver, Gold, and Platinum etc. and higher you go, more would be annual membership charges. If you don’t understand something, ask for help.

Read the terms and conditions carefully

Along with your credit card there comes a lot of printed literature and most of it is in fine print. Since it looks boring, we tend to toss it aside. On the contrary you should learn to read the fine print.

This contains very important information, terms and conditions applicable to you along with legal stuff. You might find that at the time of applying for the credit card the sales person informed that it shall be issued to you absolutely free and without any membership fee. However, the fine print reads that you must make purchases for certain minimum value every year then only you shall be entitled to free membership or there shall be a penalty of certain amount levied upon you if you do not use your credit card regularly for a certain minimum value. In that case, you can either return the credit card or ask for a different product. Sometimes the Relationship Manager of your bank is also entitled to waive off the charges.

However, you will lose your strength to negotiate if you have done even a single transaction on your credit card.

How to Use Credit Card wisely

Pay in time to avoid heavy penalties

Mostly the credit card billing cycle is monthly. Hence, you should know about when to receive your statement and pay your due amount in time. You should pay your bill on time and in full every month. Under no circumstances you should forget or procrastinate as the credit card companies charge very heavy interest on account of the delayed payment.

If you pay partial amount you will get into credit card debt, which will prove to be very expensive.

Read and check your monthly statement thoroughly

Read and check your monthly statement very carefully. Reconcile the transactions with the charge slips and invoices of the purchases made by you.

To be still safer, you can go online and check the statement once or twice a week. By doing this, you can prevent small irritation from becoming a larger issue. A timely call or an email to the credit card company for doing the necessary correction is much better than entering into a bigger dispute

Also you will do well to keep an eye out for the possibility of any mistake or error or fraud.

Protect your interest

As always, don’t be afraid to speak up. If you notice something wrong, different or not clear on your statement or bill, immediately call the customer service. If you want to dispute a charge, immediately send an email or call customer service and take the token number of the dispute raised by you. Normally, it should be resolved immediately or within 24 hours. In case it is not done then do not feel shy or lazy to escalate. If you want a rate reduction or waiver of some charges, call customer service. It usually pays to ask. 

Be ready for the unexpected

Keep in mind that your credit card company have the right to change the billing cycle, due dates, fees, and interest rates etc. Hence every time you receive an email or the printed letter do not toss it into the waste paper basket. It may contain very important information for you to take note of.

Plan your purchases

Have you ever thought that by delaying your big ticket item purchase by one single day you can gain a credit of one month? Let us take an example. Suppose your billing cycle is from 23rd of every month to 22nd of the next month and you receive your statement for payment by 30th of the month. Therefore, if you wanted to buy iphone or buy best cell phone on 21st of a month, then wait because this purchase of mobile phone shall included in the credit card bill which you shall receive soon. But if you can delay the purchase of mobile phone by just two days, you will receive the bill in the next month’s statement. Is this not a smart idea worth following every time?

Stay within your paying capacity

Use your credit card for safety and convenience and not for borrowing money. Don’t take the option of using a credit card because you can’t afford to pay cash for something. Similarly do not be tempted to use the credit card for impulsive purchases. Many people don’t feel the money going out of their hands when they use the credit card. It is only when they are making the monthly payment that they feel the pinch.

Hence if you cannot afford don’t rely on credit cards to support a lifestyle upgrade for you.

Be careful of the special offers by the credit card company

Along with your monthly statement, you will invariably receive attractive flyers full of offers on various products. Do not take them on the face value, check and compare the prices and the complete offer before you decide to buy them. Besides the physical products, sometimes there are deals for insurance, mutual funds, investment products.  Carefully evaluate such products and services as the companies tie up with the credit card company to push the sales.

Understand the rewards

Usually the credit card companies offer reward points – depending on the value and / or the type of purchase. If your monthly purchases are sizable through the credit then you will accumulate good number of rewards points. You can redeem these rewards either to get a gift from the credit card company or get cash discount on your next purchase.

This way you can save some money due to loyalty rewards.

Keep some credit for emergencies

It is always a good idea to save a reasonable amount for emergencies. Such situations need not always be the medical emergencies but can be in any other form and the un-utilized balance in your credit card be a face save or even a life saver. You will really bless yourself on that day for using your credit card sensibly.

Thus do not use your credit always for all the purchases.

Don’t Withdraw Cash

Some credit cards will allow you to withdraw cash from your credit card up to a predetermined limit.  This may seem like easy money source, but don’t be tempted.  The interest rate on cash advances is usually much higher than the interest rate on bank borrowings and on credit card purchases, so you’ll end up paying high cost on your borrowing to the credit card company.

In conclusion

Credit card can be a good tool if you can manage it well and can be handy in case of emergencies. Remember it is a substitute or an alternative to the real money and not a source of free money. First try to use debit card or check or cash and if you still have to, use your credit card sensibly to avoid getting into any debt trap.

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  1. July 1, 2016

    […] Other useful article on this website: How to Use Credit Card Sensibly […]

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    […] How to Use Credit Card Sensibly […]

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