How to maximise the advantages of credit cards?

Personal Finance

Today, more economies are going digital and cashless. Credit cards offer many benefits, including instant cash access, no stress of theft and attractive reward points. Further, there has been a rise in online credit card spending. With online shopping, you don’t even have to step out of your home. A survey shows that online spending outweighs in-store shopping by 76%

A credit card may have made spending easy and simple, but you must be careful when using it. 

This article will share some tips related to maximising the advantages of credit cards in the best way possible. 

Why do you need to use your online credit cards wisely?

  • To avoid late feesYou have instant access to funds with credit cards. With online shopping, people are using it more. But, what you forget is that it is a debt. You need to pay the amount on the due date. Hence spend what you can pay later. Otherwise, you will face late fees. 
  • To redeem reward points With credit cards come the reward points. People keep on buying stuff and adding them up. But they forget one thing. Reward points have an expiry date. Usually, it is two years. Hence, you must redeem them within that time. If not, they will expire.  
  • Avoiding unnecessary debtA credit card has simplified our lives. But it does not mean we take on multiple cards. Some people also take one credit card to pay other card bills. That is a big red flag. You are just piling on debts. 
  • Maintain credit score Credit card bills are also a debt. Paying them on time improves our credit score. Too many cards or enquiring about them reduces the score. The credit score represents the borrower worth to the lender. Lenders approve the loan based on the credit score.  Hence, make sure you pay bills on time. 
  • Avoids fraud and errorsYou may have an unauthorised transaction in your statement. It may be due to errors or online fraud. You may lose funds. It will also reduce the credit score. Hence, to avoid that, it is essential to use them wisely. 

How to manage and use online Credit cards wisely?

  • Read the credit card agreements Before you buy a card, make sure you read the fine print carefully. It contains all the details. Be it due date, minimum due amount, late fees, cash advance charge and annual fees. It will help avoid any defaults. 
  • Don’t default on paymentsto three percent.
  • Check your statements  You can ask for physical statements from your bank. But, a quick way is to check them online. You can check them anytime and any day. It will help you keep a check on all expenses. If there are any questionable items, you can report them quickly. Hence, it is better to check them regularly. 
  • Avoid owning multiple cards , cashback and offers
  • Try to pay more than the minimum due The minimum due is the least amount you must pay on your credit card bill. It is less than the entire amount. Also, it avoids late charges. But, if you only pay these, the balance amount will attract interest. Later, you will need to pay finance charges. Hence, try to pay the full bill amount.  
  • Maintain a low credit utilisation ratio  A credit utilisation ratio reflects your credit usage. It shows how much credit you use out of the total credit available. A low credit usage shows you take on debts carefully. It reflects well on your credit score too. Lenders prefer a credit use limit of less than 30%. 
  • Be careful To avoid fraud, you must be cautious when using your credit cards. When using online credit cards, use sites with proper security encryption. Don’t click on random links and enter your credit card information. If you see any suspicious transactions, report them immediately. Also, never share your card OTP (one-time password) with another person. 
  • Be disciplined With cards, it may be easy to forget how much we have spent already. The cashback offers can further hamper it.  An important tip is to control your purchases. List your monthly expenses and other debt bills. Make a monthly budget and spend accordingly. Try to spend on what you need. 
  • Research Every bank has its credit card now. Also, all of them come with great offers. Hence, do proper research. Low-interest rates and annual fees are the best offers. Even in special rewards, choose the ones which you will use. Also, you can negotiate the rates further. 
  • Avoid cash advancesIf you need to withdraw cash with your credit card, try to do it only for emergencies. A cash advance is borrowing against your credit card. Credit cards come with a cash advance fee, which is high. 

Final thoughts 

These tips and suggestions will help you properly use the advantages of credit cards. Your children can also learn financial discipline with a credit card. You can add them to your card as an add-on. It will help you keep track of your finances. If you aren’t sure where to start, consult an expert like Piramal Housing Finance. Their experts can help you improve your CIBIL score. They can also assist you in choosing between personal loans and business loans.