Do's and Don'ts of Using a Credit Card

Credit cards are convenient for making quick purchases without having to pay for them upfront. You can also improve your credit score and manage sudden expenses, etc. However, it is important to use a credit card carefully to avoid falling into a debt trap. This blog tells you the dos and don’ts of using a credit card that every conscious consumer must know. Read on!  

Dos and Don'ts of Using Credit Cards 

Here are some dos and don'ts for effective management of a credit card: 

Credit Card Do's 

• Know the Terms and Conditions: You should carefully review all the terms and conditions of your credit card before getting one. You should pay attention to interest rates, repayment periods, associated charges, offers, etc. 
• Get a Credit Card Only If You Need It: Apply for a credit card only if you need it. You should not apply for a credit card without any need as getting it without any need can make you pay unnecessarily. This is because there is always a minimum fee that you need to pay even if you do not use your credit card. 
• Due Dates: Keep a track of due dates by which you have to make payments. Making payments on time improves your credit score and helps you get better financial opportunities. You must avoid having multiple due dates to remove confusion. 
• Check Your Credit Card Statements: Monitor your credit card statements regularly. This helps you find out if there are any frauds, transactions that you don't recognize, hikes in interest rates, and other changes to your account. 
• Pay More Than the Least: Choose to pay more than the least amount option, as you pay more interest with small payments. Paying more within a shorter period reduces the debt burden and minimizes the overall cost of borrowing. 
• Pay on Time: Paying your credit card bills on time helps in increasing your credit score. You should only apply for a new credit card after paying off the debt of your previous or existing one. 
• Keep Your Credit Utilization Ratio Low: Your credit utilization ratio should not be more than 30%. Keeping this ratio below this limit is considered good as it increases your credit score and helps to avoid debt problems. 
• Maintain a Low Debt-to-Income Ratio: Debt-to-income ratio shows the portion of your income that has to be utilised to repay your debt. Maintaining a debt-to-income ratio below 41% reflects your repayment capability. This also provides relief from the high debt burden. 
• Keep in Touch with Your Credit Card Company: You should be in touch with your credit card company to resolve queries and problems. You must always raise concerns, if any, and reach out to your credit card company for solutions. 

Credit Card Don'ts 

• Do Not Max Out the Limit: Never exceed or max out your credit card limit. Reaching or maxing out your credit card limits can lead to penalties and charges. It also affects your credit history and credit score negatively and drops it. If you need to spend more than the limit, request your credit card provider to increase it. 
• Don't Use Your Credit Card Unnecessarily: Do not utilise your credit card to cover daily expenses. Use it in emergencies and only if required. It can increase your credit utilization ratio and interest payments as well. 
• Don't Miss Payments: You should never miss any of your credit card payments. Missing out on your credit card payments can negatively impact your credit or CIBIL score. It can also reduce your chances of securing better financial assistance in future. 
• Don't Apply for Multiple Credit Cards: Applying for multiple credit cards over a short period can negatively affect your credit score. This is because every time you apply for a new credit card, an inquiry happens on your credit report, and multiple inquiries within a short period of 6 months can bring your credit score down. 
• Never Give Your Credit Card Number to Anyone: Do not give your credit card number to anyone as it is risky. There are many frauds where credit card users get played by providing their credit card numbers to unknown people. You should be careful about it, and this number is secret. 
• Avoid Cash advances: Never use your credit card for cash advances as it doesn't allow you to have a grace period, meaning the interest starts getting accrued immediately. 
• Do Not Chase Rewards: Avoid chasing offers and rewards as they attract you to spend more and more, which increases your credit utilisation ratio and interest cost. 

Also Read - What is the Difference Between Credit Freeze and Credit Lock

To Conclude 

Credit cards are beneficial as they allow you to purchase through easy EMIs without paying the full amount in one go. It is essential to build responsible credit card habits. Keep the dos and don’ts in mind when you get a credit card to avoid falling into a debt trap. You may also get a Personal Loan from Poonawalla Fincorp to meet any urgent financial requirements. Click on the ‘Apply Now’ button to get started! 

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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