9 tips on how to use credit card wisely

as the decades have turned since the liberalization of trade in India, there has been a lot of changes in the spending habits of the average Indian. with more stable sources of income, and a higher fraction of disposable income, how people look at money has also undergone a significant change. this change has led to people choosing credit cards as a preferred way of making bill payments.
sadly, the world of credit card usage is one of immense potential, and beginners are often unaware of how to use a credit card effectively in order to maintain/ improve your credit score. callousness on your part can cost you heavily, and you may end up paying way more than what you need to. to help you avoid making such mistakes, we have formulated a list of best expert tips which will ensure that you do not go recklessly on the powerful plastic card that you have in your hand.

1. plan your repayment
before you consider any purchase on your credit card, you need to have a detailed strategy on the repayment. it is a great idea to pay off your credit card bill before the due date. 
not only does this help in improving your credit score, but it also helps in establishing a good credit profile with the lender. such profiles are often given better deals on personal loans, discounted financial products, and a host of other benefits.
most banks also offer you the option of paying back your credit card bills through installments. if you are going through a financial strain, such measures will help you take the load off your head and are a welcome gesture. however, in the long run, these often lead to higher interest payments, thus making it important for you to plan your repayment.

2. use a credit card only at trusted merchants
you must be aware of the fact that the odds of a credit card fraud are higher than one with a debit card. that is why it is a great practice to use a credit card only at trusted merchants. it holds in the case of a local store as well as online shopping.

3. borrow only what you can afford to pay back
with a host of different credit card options available, it is often seen that the credit card limit of an individual is much higher than their monthly income. it is important to track your monthly spending and use only an amount that you can be confident of repaying. it will save you unnecessary interest compounding, huge debts, and help you establish a financially sound future for yourself and your family.

4. do not max out the limit
when you are using a credit card, the core idea is that you are spending money that you do not have yet. it might seem tempting for new users pushing them on the path of overspending. the first step here is to ensure that you do not max out your credit card limit no matter what the situation.
ideally, you should restrict your credit card usage to 2/3rd of the limit. for instance, if your credit card limit is ₹3 lakh per month, plan its usage in a way that you do not spend more than ₹2 lakh. it will help you maintain a good credit card score which will be of help at a later stage.
most banks offer the facility wherein you can set a personal spending limit on the credit card. it is a great option for people who aren’t confident about their shopping habits.

5. time your purchases
every credit card is different, and one of the first things that you need to do is understand the billing cycle of your card. as most credit cards have a monthly billing procedure, if you can time your purchase to days immediately after the bill generation, you will have about 45 days of interest-free period for bill payment. depending on your card, the period may be longer.

6. keep track of your spending
the proper usage of a credit card requires one to be disciplined and understand their spending patterns. it is only when you keep a detailed account of all your spends will you be able to identify an unexpected transaction without any time wastage. 
when such false transactions are brought to the immediate notice of the bank, most of the time, there is room for rectification. understand that none of this would be possible if you do not keep track of your transactions on the card.

7. be aware of the rewards
almost all credit cards come with a host of benefits and rewards under its loyalty program. from special discounts on e-commerce sites to free movies or flight tickets, there is a range of benefits for credit card owners. to make the most of them, you need to look up the reward program if your credit card issuer and keep yourself updated.

8. keep a tab on your credit report
once you are cautious about your spending habits, the next step is identifying an improper detail associated with the card. the details may range from things like a change in your address or employer to amendments in your marital status. sometimes, mistakes like fraudulent transactions or accounts may be linked to your card.
unless you read your annual credit report, you will not know about these things. it is a wise practice to invest your efforts in reading and understanding your credit report. it will help you identify errors as well as plan your credit card expenditure.

9. be wise on your credit card balance
while you need to know how to use credit cards and pay its bills on times, sometimes it is inevitable for you to carry forward a balance. in such a situation, you need to be extra cautious and ensure that you are making every monthly payment promptly. whenever possible, pay off more than the minimum due so that the amount is paid off sooner. 
also, remember that if you have some balance amount on your card, you need to be frugal about the credit card’s usage so that the overall monthly usage is stalled at below 30% of the credit card limit. and you must always remember to pay your credit card bills on time touching the credit card limit while having an existing balance is seen in poor light by potential lenders.
with these tips, you are now prepared to use your credit card in a way that favours your finances and ensures that you make the most of the benefits offered.
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