Credit Cards today are an integral part of our financial lives. They offer convenience while shopping or making online bill payments, as well as meeting sudden financial emergencies. However, the ease with which one can transact using a credit card also makes a lot of people forget the pitfalls associated with their indiscriminate use. Follow these simple rules to get the best out of your credit card.
Pay bills on time
Credit card issuers tend to charge stiff penalties in case your payment is delayed beyond the due date. It therefore makes sense to make your payments on time. Also remember that if you make a habit of not paying your dues on time, it would adversely affect your credit score and thereby ability to take loans such a home loan or a car loan.
As far as possible, pay the full amount due
While all credit card issuers offer to rollover your dues, provided you pay the minimum balance, financially this is a wrong decision. The dues on your credit card are like an unsecured loan advanced to you by the issuer. While there is no interest applicable if you pay the entire amount due on time, any outstanding amount is charged a steep interest, generally in the region of 2% - 4% per month (in some cards, even more).
You also need to remember that this interest is charged not just on your old outstanding, but also on any new purchases you make. An example will illustrate this better. Mr. A has Rs. 10,000 outstanding on this card, and he makes a payment of Rs. 3,000. His outstanding dues are Rs. 7,000. Let’s say now he spends and additional Rs. 2,000 on his card. The card issuer will charge Mr. A interest NOT just on the outstanding Rs. 7,000 but also on the new purchase of Rs. 2,000. This can be financially ruinous.
Avoid withdrawing cash on your credit card
Remember, your credit card is not an ATM card. Any cash withdrawal you make on the card will attract hefty finance charges, most often 2.5%. Additionally, you get charged interest from the time of withdrawal to the time you repay. So, use your credit card to withdraw cash only in the case of a dire emergency.
Look out for deals
Credit card issuers like Axis Bank offer great deals to their customers in terms of higher discounts or greater reward points. So, next time you want to shop for something, first check for the deals available. If you hold an Axis Bank credit card, click here to get information on the latest deals.
Similarly, all banks give reward points to their customers which can be redeemed to make attractive purchases. But these reward points come with an expiry date. Axis Bank reward points for example are valid for three years. So, redeem these points before they expire.
Read your credit card statements carefully
A credit card statement is a financial statement, just like your bank statement or demat account statement. It is your financial responsibility to read it carefully to ensure that all the fees and charges are accurate. In case you think there is some error, you should get in touch with the issuer immediately and seek redressal.
Choose the right card
Card issuers often tie up with other merchants like airlines or oil companies to offer co-branded credit cards which offer attractive rewards. Analyse your spending pattern and choose a card
that will give you the best rewards. For example, if you regularly use your credit card to fuel up, then it might make sense to get a fuel card, which will give you bigger rewards. Similarly, if you tend to travel a lot, it might make sense to
get a travel card which would not only give greater reward points, but also use of exclusive lounges at airports.
Remember these thumb rules and keep enjoying the great convenience that a credit card offers.
Disclaimer: This article has been authored by The Source, a Mumbai based content creation and curation firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & The Source 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.