Today, a relatively large number of individuals can afford a credit card, although in the past they were only available to the wealthy few. The card offers financial flexibility and is safer than real currency, among other benefits. Buy now, pay later is possible with credit cards. Thus, it is useful during a financial crisis. If all of this isn’t enough, credit cards also come with a variety of discounts and bonuses that provide you access to lifestyle advantages and money-saving deals.
Using a credit card India has grown consistently for the previous 20 years, albeit there has been a significant increase in the last five years. From 2.98 crore in 2017 to 7.02 crore by January 2022, credit cards were issued. Although usage has grown, many cardholders are still uninformed about the advantages and drawbacks of carrying a 2 x 3 inch piece of plastic in their wallet. Credit cards are convenient for making purchases, but they also have a lot of additional uses if you utilise them properly.
1. Set Transaction Limit
Setting a limit on your spending is another approach to prevent card fraud. This is especially important if you chose to use the Wi-Fi feature on your card, as it just takes one tap to deduct money from your account. It is wise to establish a lower limit for these tap transactions as a bigger payment would be necessary. Using your PIN, swipe the card. Even if online purchases require OTP, it is still crucial to set restrictions for these transactions. Be particularly watchful of foreign transaction restrictions. It’s incredibly dangerous because OTP won’t be required for international usage. Deactivate foreign usage on your card if you aren’t going abroad or making any transactions there.It can be reactivated whenever required.
2. Improve Your Credit Score by Using All of Your Cards
Keep your credit usage ratio low since this is a simple approach to raise your credit score. It simply refers to how much of your credit line is being used. Your credit usage ratio will thus be 10% if the combined credit limit on all of your cards is Rs. 6 lakh and the total sum due is just Rs. 60,000. The percentage rises to a high level of about 33% if your outstanding debt reaches Rs 2 lakh, though. Less than 30% is considered a healthy ratio, and less than 10% is ideal. A healthy credit usage ratio is maintained by using two or more cards, which spreads out your spending and increases your credit limit. It aids in the development of your credit history and CIBIL score over time. Your credit limit is then increased even more, which might be advantageous in an emergency.
3. Autopay Credit Card Balances
Pay off the whole balance on your credit card before the due date each month to avoid late penalties and increased interest rates of 24% to 46% each year. Using your card’s Autopay option is the easiest approach to make sure you never forget a payment. You have the option to set up automatic payments for the minimum, a predetermined custom amount, or the entire amount. Make sure you pay at least the required minimum to avoid penalties for late payments and to maintain your credit score. Avoid the “minimum payable” trap, though, or you may accrue significant interest on your outstanding sum, which can eventually lead to a greater debt. If you roll over your credit card payment, the card issuer will charge 2-4% not only on the remaining debt, but also on new purchases in the next month. Even if you’ve chosen Autopay, you should still examine your credit card information and make sure you have the funds available; otherwise, your bank will impose a refund payment fee. Your credit score may be negatively impacted by frequent payment failures.
4. Prevention of Fraud
When making purchases, credit cards are practical. However, if you’re not careful, a hacker might take your card information and use it fraudulently. Choose two-factor authentication to prevent fraud, which requires you to confirm any card transaction with an OTP sent to your email or mobile device. You receive SMS notifications every time you swipe your card in India, fortunately, so if you notice any fraudulent transactions, block your card right away by contacting the bank’s customer service line or via net/mobile banking. Give. In the next 48 hours, register a complaint with the card issuer and notify the National Helpline 1930 of the infraction. The bank will refund your money if it is certain that another person used your card without authorization.
5. Use two or three cards for a longer Credit term
If there is an issue with one particular credit card, experts advise having at least two more cards so you have financial flexibility. You may divide a bigger cost this way as well, preventing you from using all the available credit on one card. To extend your time of interest-free credit, you can apply for more than one card. The following graph illustrates how you may use one card for purchases up to the 15th of the month, then move to another card for purchases up until the 25th, and finally switch to the third card. You can use each card’s interest-free term to its fullest if the bill payment is due on the 15th, 25th, and 30th of the subsequent month, respectively. Instead of feeling pressured to pay a big payment all at once, you’ll be able to lower your spending and pay your bills easily this way.
6. Choose the card based on your Consumption Habits
Customers are enticed by credit card issuers through a range of membership bonuses and co-branded promotions. Because your card usage should be connected to your spending habit, you need to be wise about which one works best for you.
7. EMI transactions and Cash Withdrawals should be avoided
A big-ticket purchase can be turned into an EMI transaction using a credit card after it has been made, allowing for flexible repayment over a period of three to six years. You may do this up to the day your credit card statement is due. These transactions, however, are not free, and even if there are a few, you will still be required to pay processing fees, service fees, convenience fees, GST, etc. The interest rate may often vary from 13 to 24 percent, which is pretty hefty. Credit card debt is among the most costly forms of unsecured debt.
8. Rewards & Cashback
Credit card applications were formerly common. If you know how to utilise them properly, they may be useful. For instance, get a co-branded credit card with an airline if you travel regularly so that your purchases can help you accrue “Air Miles” that can be used to book flights. If you often make purchases from a certain website, you may use this money by selecting a co-branded card that gives cashback, such as the Amazon Pay ICICI credit card, which pays 5% cashback on Amazon purchases. Future usage is possible buy through Amazon.
You may often reduce your expenditures by ranging from 0.25 to 3.3%.There may be limitations on how you may utilise the reward points or money, though, so that’s the catch. You might have to pay an additional fee to redeem the reward points, there might be a minimum or maximum number of points you can spend, or you might only be allowed to use the cashback on certain websites. Also take aware that reward points may have a deadline. You may exchange your points for goods, deals, air miles, or cash. The best choice, according to Rohira, is to redeem cash rather than a discount certificate because the latter might not be used right away. However, in contrast to coupons The former is still more appealing because you can use cash to pay your credit card payment, even though the conversion rate of redemption points is lower in the case of cash.