What is a Credit Card: Meaning, Benefits, and How To Use It?

The number of credit users has increased significantly. While getting a Credit Card has now become easy, not many people know how to make the most of it. This article gives you valuable tips on how to use it smartly.

Credit Card Meaning

A Credit Card is a financial instrument that allows you to avail of credit on all your financial transactions. In simple terms, a Credit Card is a debt instrument that allows you to buy things now and pay for it later. All Credit Cards come with a specific credit limit, which is set by the issuer based on your credit score and your eligibility criteria.

How to use Credit Card smartly?

• Get a higher credit limit

The maximum credit limit sanctioned to the Credit Card users differs from user to user based on their eligibility criteria, and the credit score. When you apply for an online Credit Card, ask the issuer for the highest possible credit limit. Apart from increasing your purchase limit, the higher credit limit will also improve your credit score.

• Understand the rewards

Most Credit Cards in India come loaded with a host of reward programmes and offers on a certain type of spending. Some high-end cards provide free access to the airport lounges, while others provide additional reward points on purchasing grocery or fuel recharge. Do your research well about the reward point system and use the card strategically, so that you get the best out of the rewards and benefits.

• Pay your dues diligently

Credit Card companies impose high-interest rates and penalty fees on outstanding dues and late repayments. So, to avoid paying those heavy interest and penalties, make sure that you pay out dues on time. This will also improve your credit ratings.

• Don’t use a Credit Card to withdraw cash at an ATM

You can use the Credit Card to withdraw cash from the ATM. However, it is advisable that you avoid using this facility unless it is an emergency. ATM withdrawal attracts heavy Credit Card interest rates.

• Don’t just pay the minimum amount payable

A lot of people have this wrong notion about Credit Card payment that paying the minimum amount is enough. However, the Credit Card issuers charge a hefty interest on the balance amount. So, to avoid paying those charges, you must try to pay the dues in full every month.

• Check your statement carefully

Apart from paying your bills on time, make sure that you scrutinise your monthly statement and understand what charges are levied in your bill. Also, look if there is any suspicious transaction. This could be because of Credit Card fraud. Never share your Credit Card details with anyone.

• Use your card only at trusted stores

If you use your Credit Card for online purchase or buying things from a local store, make sure that the retailer is a trusted one. This will minimise the risk of your Credit Card identity theft.

Now, that you know how to use Credit Card smartly, you can apply for a Credit Card online and make the most of it.

Keep an eye on your Credit Card spending

Maintaining a close watch over your expenditure is of utmost importance, especially when it pertains to Credit Cards. These plastic cards can be incredibly convenient but without careful management, they can quickly lead to financial trouble. To help you stay on top of your Credit Card expenses, consider the following pointers:

1. Set a Budget:

   Establish a monthly budget that includes specific allocations for Credit Card payments. This will give you a clear picture of your financial obligations and prevent overspending.

2. Track Your Purchases:

   Keep a track of every transaction you make using your Credit Card. Utilise digital tools such as mobile banking apps or personal finance apps, to monitor and categorise your spending.

3. Be Mindful of Interest Rates:

   Credit Cards often come with high-interest rates. If you carry a balance, the interest charges can accumulate rapidly. Paying off your balance in full each month can save you from unnecessary interest expenses.

4. Avoid Impulsive Buying:

   Before making a purchase, ask yourself if it is a necessity or an impulsive desire. Consider waiting for a day or two before finalising a non-essential purchase, giving yourself the time to evaluate if it aligns with your financial goals.

5. Utilise Credit Card Rewards:

   Many Credit Cards offer Rewards Programmes such as cash back or travel points. Take advantage of these benefits by using your Credit Card strategically for purchases you would make anyway but always ensure you can pay off the balance.

By implementing these pointers, you can maintain control over your Credit Card spending and prevent debt from spiralling out of control. Remember, financial responsibility starts with being aware of your spending habits and making informed decisions.

Conclusion

As the number of Credit Card users continue to rise, it is essential to understand how to make the most of this financial tool. This article has provided valuable tips on smart Credit Card usage. By getting a higher credit limit, understanding rewards, paying dues diligently, avoiding cash withdrawals, paying more than the minimum amount, checking statements carefully and using the Card at trusted stores, you can navigate the Credit Card landscape wisely. Maintaining a watchful eye on your spending habits is crucial to prevent financial missteps and ensure a healthy financial future. So, apply for a Credit Card with confidence and use it smartly to optimise your financial journey. Remember, financial responsibility and awareness are key to making the most out of your Credit Card experience.

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