How to make the most of your credit card?

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Plastic Money

A credit card is a necessity in today’s times. But do you know that you can do so much more with your credit card than what meets the eye? This is how you can make the most of your credit card.

A credit card is type of unsecured loan provided to you by the bank for your emergency needs. For starters the best thing about credit cards is that you do not need to worry about carrying cash. Also when you are out shopping, you may not be able to estimate the cost of the product in advance all the time. Loading your wallet with money can be risky too. The answer is plastic money or a credit card. The other advantage you have is that with a credit card your expenses are logged and recorded in a monthly statement which means it is easy to maintain an account. New age credit cards come with multiple layers of security and each transaction you do is usually protected with a unique PIN (personal identification number) that needs to be entered before the transaction is approved. Today a big trend is online shopping and such transactions can be safely done with a credit card. And if you are concerned about security, you could verify the transaction using a one-time pin that is sent to your registered mobile number and is usually valid for a few minutes so that there is no scope for any fraud. While these are some given ways in which you can use your credit card, you can actually do much more with it. However keep in mind to always check acceptability of card to avoid hassle. This is because some credit card companies charge slightly higher fee as compared to others from some merchants which may result in them not accepting that particular card. Another thing that you must note before you choose a card is to see if the bank has good customer service. This is very important because at times transactions seem to be charged to your card but actually would not have been debited to the bank. Likewise in the unfortunate event of losing your card or in case of theft, make sure you block your card immediately by getting in touch with the customer care team. Here is how you can make your credit card work to your advantage.

Ladies Special

Lending institutions view women as having a better credit risk profile meaning that women have better ability to repay credit card amount dues compared to men. Amit Bhor, CEO and Co-Founder, Walnut a personal finance management app says, “use this to your advantage. Several banks have credit cards specially for women, with useful benefit such as concierge services and offers on home purchases, personal care and lifestyle products.”

Direct Debits

Today most banks offer facilities wherein you can use your credit card to make direct payments for utility bills like electricity, telephone and other monthly payments. The best part is that these need a simple setup and then the debit happens automatically just before the due date. There are also offers such as 5% cash back that ensure that you are actually getting a discount on a standard statutory bill.

Cost Factor

There could be some annual charges which you must be aware of while choosing a card. “Also, remember to pay your bills on time or you may end up paying interest and late payment charges later. Moreover, credit cards have a monthly credit limit and you may not be able to spend more than that,” says Neha Gupta, Co- Founder and Chief Experience Officer, CurrencyKart. Do not get into a debt trap by paying the minimum amount due. Rather always clear your dues in full. “Before you go into formalities of getting a credit card, it is advisable to go through the credit card features very vigilantly, as sometimes the interest rates are scripted in very small starred letters. It comes with two options like in loans, fixed and variable, try to choose a fixed interest option,” advices Anil Rego, CEO & Founder, Right Horizons.

Credit Worthiness

With a credit card ownership there is a responsibility of “paying your dues in time”. If by any chance that discipline is missed then you have to bear the brunt, by paying extra 30-36% on the outstanding amount. Moreover, it will lead to bad credit ratings which will prevent you from getting other credit cards, mortgages and loans.

Loyalty Points

Some credit card companies have an excellent membership rewards program where you collect points depending upon expenditure which could be used for shopping, dining, travel and the like. While choosing a credit card, also think about your brand loyalty. This is because many credit cards have co-partnerships with different brands and if that is a brand you have an affinity with, you can maximize your reward points.

Avoid cash withdrawals

Never withdraw cash against your credit card as the finance charges are extremely high. “In case you require cash in an emergency, it is better to borrow or take a personal loan. Most importantly, pay your credit card bill on time and in full,” says Amit.

Manage Limits

The amount you can spend using your credit card has a monthly limit. Try to compare good credit card lenders and go for the card that backs your purpose. “Do not use your credit card more than 80% of your limit as using it fully can stress you financially and you will look less attractive to lenders if you opt for any loan or mortgage,” says Anil.

Understand EMI’s

When making a purchase that involves equated monthly instalments or EMI’s, do read the fine print. EMI’s often come with terms and conditions that involve high fees and other payments that may not be clear at the onset. “You can use the credit card to pay for big purchases as now-a-days there is an option of interest free EMIs. This is offered if you do not have any outstanding balance and usually is over a specific duration of 6 months or 9 months so be aware of the same,” says Anil.

This article has appeared in the Feb 19, 2017 issue of Femina.

Plastic Money

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