The comfort of buying now and paying later has caught up with a lot of consumers. As credit cards provide the same convenience along with many other benefits, they have gained much popularity in recent times. With the right credit card, you can not only save but also earn attractive rewards on your transactions. At the same time, using your credit card recklessly can also lead you into a huge financial crisis. This is why it is important to use your credit card wisely to get the most out of it. Here are some of the tips to use your credit cards optimally.
Choose your credit card wisely
Choosing the right credit card is the first step toward maximizing your benefits. It is important to analyze your requirements and spending pattern before applying for a credit card. Always choose a credit card that matches your spending preferences as it will be easier for you to get the most value out of it. For instance, if you commute on a daily basis and fuel expenses are unavoidable for you, then choosing a card like BPCL SBI Card Octane is the right option for you. It is one of the best SBI Credit Cards that offers benefits on your fuel expenses.
Watch your credit utilization ratio
Using your credit card wisely is as important as choosing the right card. The Credit Utilization Ratio (CUR) is the ratio of the credit limit utilized by you divided by the total credit limit available with you. You must ensure not to exhaust your entire credit limit as it reflects that you are highly dependent on credit and negatively impacts your credit score. Therefore, it is important to maintain a good CUR in order to make the most out of your credit card and maintain a good credit score.
Suggested read: Everything You Need To Know About Credit Score
Pay your credit card bill on time and in full
Credit cards come with numerous benefits, but they also attract high interest charges for missed or late payments. Also, many card users think that paying the Minimum Due is enough to avoid penalties and keep the card active. However, when you pay the Minimum Amount Due (MAD) and revolve the outstanding balance to the next cycle, then interest charges will be levied on your outstanding amount. In addition to that, the fresh purchases you make will also attract interest charges from the first day. This can quickly escalate your outstanding balance and pull you into deep debt along with damaging your credit score. Hence, paying your bills in full and on time is important to save yourself from high interest charges.
Track your reward earnings
If you are using your rewards credit card actively, then you must plan the usage in a way that maximizes your earning. For example, if your card offers higher reward points on groceries, you should put grocery spends on the card and get maximum rewards. Also, most of the reward points come with an expiry date, after which you cannot redeem them. In order to maximize the benefits, track your reward points and redeem them before they expire. You can redeem the earned reward points against a variety of options such as hotel bookings, vouchers, merchandise and more depending on the credit card issuer. Therefore, if your credit card offers reward points, timely redeem them to maximize your benefits.
Opt for a credit card balance transfer
If you have outstanding balance on one card that is going out of hand, you should opt for balance transfer instead of paying just the minimum amount. The interest charged on balance transfer is much lower than the finance charges that would be applicable on revolving the balance. This is why it is recommended to opt for this facility. Besides this, you can also avail a personal loan to pay off your credit card debts, as personal loans are offered at a lower interest rate compared to the interest charged on credit cards.
Using your credit cards responsibly will help you save a considerable amount on your favourite purchases and also offer you the convenience of paying in instalments. However, using them recklessly can lead you into a debt trap. This is why it is important to understand the benefits on your cards, plan the expenses around the card features, maintain a good credit utilization and pay your bills on time to get the most out of your cards.