How to use a Credit Card effectively and smartly

Credit cards are now essential in our daily financial activities, offering ease and adaptability in both transactions and financial planning. However, their imprudent use can lead to debts and avoidable charges. This guide outlines smart credit card usage and cost-cutting strategies to help you make the most of your credit card benefits while steering clear of debt.

If you are wondering how to use credit cards wisely, employ the smart practices outlined below when using credit cards. By doing so, you can make the most of their advantages and mitigate the risk of financial pitfalls.

Leveraging the Credit Card billing cycle

Effective financial planning hinges on comprehending the credit card billing cycle, which dictates the duration for issuing a credit card bill. Knowing your card's bill generation date allows you to optimize the interest-free period. For instance, making a purchase soon after your credit card bill is generated can grant you up to 45 interest-free days, and occasionally even more.

Know how your Credit Card's interest is calculated

As a cardholder, understanding the credit card interest rate is crucial for optimal usage. It represents the cost of borrowing on your card, affecting the interest on balances. The Annual Percentage Rate (APR) is an important factor in card selection, determining charges on outstanding amounts. Typically expressed as a percentage, the APR includes various fees like annual, balance transfer, and cash advance fees. Choose wisely, considering that credit card interest rates are generally higher than those for mortgages or car loans.

Pay Credit Card bills on time

Securing timely payment for your credit card bills is a crucial element in maintaining a positive credit score and avoiding late fees and interest charges. The repercussions of late payments extend to significant impacts on your credit score, potentially posing challenges in qualifying for future loans or credit cards. Consider establishing automatic payments or setting reminders to settle your bill on or before the due date. Even if you are unable to clear the full balance, strive to at least meet the minimum payment to evade late fees and prevent adverse effects on your credit score. By consistently settling your credit card bills promptly, you can uphold a robust credit score, sidestep fees and interest charges, and construct a positive credit history.

Check Credit Card statements regularly

Consistent vigilance over your credit card statements is paramount for prudent financial management. This practice not only facilitates effective expense tracking and ensures precise billing but also serves as a robust defense against fraud, preventing potential financial setbacks. It is imperative to scrutinize your statements diligently on a monthly basis, meticulously verifying all charges and payments to maintain fiscal accuracy. For Axis Bank credit cardholders, the process is made more convenient through the Axis Bank mobile app, providing easy access to your monthly statements. In the event of any discrepancies or unauthorized transactions, swift reporting through the app is recommended, reinforcing financial security and stability.

Smartly manage Credit Card bill repayments

Being savvy with your Credit Card repayment is essential to your financial well-being. If you find yourself in a challenging debt situation, consider the option of balance transfer—transferring dues from one card to another can be a game-changer. Additionally, prioritize paying off debts with the highest interest rates first; it's a commonly overlooked strategy that significantly reduces your overall interest outlay. While many might focus on clearing debts with shorter due dates, tackling those with higher interest rates first is a more financially prudent approach. Given the high-interest rates and late payment fees associated with credit cards, setting up automatic payments is a wise choice to ensure timely bill settlements and avoid unnecessary charges.

Use free offers and rewards on Credit Cards

Leveraging the available offers and rewards on your card is a great way to optimize the advantages of your credit card and cut costs on your everyday spending. Numerous credit card companies provide reward programs enabling you to accrue points or cashback on your purchases. Axis Bank has tailored its credit card rewards and offers to offer customers a diverse range of benefits and savings on their purchases. The bank provides a selection of credit cards designed to accommodate various lifestyles and spending habits, each with its unique rewards and advantages. Popular perks for Axis Bank credit card users include cashback, reward points, and discounts on dining, shopping, travel, and fuel. Additionally, some cards provide exclusive access to airport lounges, movie tickets, and events, further enhancing the value of using your credit card strategically.

Use your card at trusted merchants

When making transactions, prioritize trust, whether online or in-store. Ensure the merchant is reputable to minimize the risk of card misuse and prevent fraud. This approach creates a secure financial environment, safeguarding your card details. Trust not only protects you but also ensures the best deals. Choosing reliable merchants contributes to a secure and seamless shopping experience, enhancing both financial peace of mind and transaction value.

Monitor your credit card usage

Neglecting to monitor your credit card expenses may lead to falling into a debt trap. Therefore, it's crucial to closely watch your credit card spending. Regularly tracking your expenditures aids in resisting the temptation to overspend. Moreover, setting transaction limits for specific purchases on your credit card makes it simpler to adhere to your spending goals.

Use the right card for the right purchase

If you have multiple credit cards, use the one that aligns with your specific needs. Some cards are tailored for distinct expense categories. For frequent travelers, credit cards offering air miles or hotel booking discounts can save on travel costs. Utilizing a fuel card is advantageous if a substantial portion of your income is allocated to fuel expenses.

Convert your purchases into EMIs

If you're struggling to settle your credit card balance, explore the possibility of converting the outstanding amount into EMIs. The interest rate and tenure associated with this option may vary across different banks. Opting for EMIs offers the advantage of making your credit card bills more manageable, eliminating the need for a lump-sum payment. By avoiding the burden of a substantial one-time payment, the likelihood of defaulting on payments is reduced. This repayment approach contributes to the gradual improvement of individuals' credit history over time.

In conclusion, mastering the art of using credit cards smartly is paramount for financial well-being. From understanding the billing cycle to being cognizant of interest rates, timely bill payments, and vigilant statement scrutiny, each aspect contributes to a robust financial strategy. Leveraging rewards and offers, choosing trusted merchants, and monitoring credit card utilization prevent unnecessary debt traps. Tailoring card use to specific needs, considering balance transfers, and converting purchases into EMIs are additional tools for effective credit management.

Also Read: Navigating Credit Cards features and benefits

Frequently Asked Questions (FAQs)

1. What are some tips for using credit cards wisely?

• Establish a credit limit and routinely review your credit statements.
• Strategically time your purchases and ensure timely and complete bill payments.
• Timely settlement of your credit card bills is crucial.
• Select a credit card that matches with your spending patterns and make effective use of rewards.
• Continuously work on improving your credit score while staying mindful of your expenditures.

2. What are the top reasons people use credit cards?

• Instant financial support for unexpected expenses or flash sales.
• Builds positive credit history with responsible usage.
• Offers rewards like fuel discounts, restaurant savings, and travel perks.
• Facilitates big-ticket purchases through affordable EMIs.

3. How to use a credit card for the first time?

When using a credit card for the first time, start by understanding the terms, activating the card, and setting up online access. Secure the card, make a small purchase, and monitor spending. Pay the full balance on time to avoid interest and be mindful of your credit limit. Explore rewards, regularly review statements, and cultivate responsible credit habits. For any queries, contact customer service. Following these steps ensures a positive introduction to credit card usage and a healthy credit history.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.