Being careless can result in a heavy loss from a credit card. While inefficient use of credit cards could be devastating, good use could be advantageous for the consumer. Credit cards are among the strongest sources of income for banks because they carry high interest rates (between 36% and 40% annually) for late payments of the outstanding balance. If utilised carefully, credit cards could be a better financial planning tool from the consumer’s perspective. Here are 6 prudent advice for new credit card users.
To transfer a balance on a credit card simply means to move the balance from one card to another. By doing this, you end up paying for the first card and owing money for the balance transfer to the second card. For a few months, a lot of credit card issuers offer 0% balance transfers. By transferring from one credit card to another, you can obtain money that is interest-free or has a cheaper interest rate for a short period of time. However, please take great care not to go beyond the promotional period since once it expires, interest rates go up significantly.
Keep Utilization Ratio in mind
The effect of credit utilisation ratio on credit score is one of the most crucial things to understand while using credit cards. To maintain a good credit score, it is generally advised to keep your credit use ratio around 30%. The credit score will suffer if the credit card is frequently used and the credit limit is frequently reached. Choose many cards in this situation to prevent the credit score from being lowered.
Pick the right credit card at right place
Knowing the perks associated with each credit card is important if you use several of them. You must use the appropriate card at the appropriate time in accordance with the benefits associated with it to receive the greatest benefits. For instance, while you are grocery shopping, you should utilise the card offering the highest cashback and discounts. Similarly, when travelling, use a card that gets you the best hotel deals or helps you accrue Air Miles. Check out these credit cards from ICICI Bank and Indusind Bank, which are accepted quickly and give respectable Payback points based on your needs.
Credit Card Credit Score Improvement
Many of us have made mistakes in the past when applying for a personal loan, home loan, or auto loan, severely harming our credit score (CIBIL score). Poor LTV (Loan to Value), excessive interest rates, or, in the worst case scenario, the rejection of all future loans are the consequences of having bad credit scores. The greatest strategy to raise a poor credit score is to choose the correct card, encourage regular usage, and make on-time payments. Due to the fact that a credit card balance is treated as a loan, prompt payment raises the consumer’s reputation, which gradually raises the credit score.
Avoid carrying forward the balance
The worst use of credit cards is carrying over the balance by making the minimum payment. The outstanding has a high interest rate, which significantly increases your financial burden. Always put on top of your priority list when using credit or debit cards to pay off the entire balance by the due date. Connect the bank account and the card to have ECS automatically pay the balance due (Electronic Clearing System). took out personal loans or received support from loved ones, but you never paid the debt off.
Don’t forget to redeem the rewards
You receive reward points for each credit card purchase. As an example, some cards award 1 point for every 100 rupees spent, while others award 1 point for every 150. Different cards offer different points on spending. The credit card with higher rewards on reduced expenditure is the one to choose. You can use the earned reward points to pay off any unpaid card balance or to redeem them for merchandise. The benefit of using a credit card over a debit card is that you can do it both ways.