Credit Card

Tips on Using Your Credit Card Responsibly

When used in a responsible way, plastic money is very useful. Ensuring you make timely payment of the bill amount is beneficial in improving your credit score. Moreover, you may enjoy reward points and cashback offers on your spending.

However, if you fail to make timely payment thereby accumulating finance charges, you may end up in a debt trap. Here are five tips that will help you to use your credit card in a responsible manner.

  1. Make necessary purchases

Because you do not have to make immediate payments, you may be tempted to use your credit card to make unnecessary purchases. It must be used as a temporary means to finance your requirements to avoid complexities in the future.

  1. Do not miss a payment

Making the full payment on or before the due date is the best option. However, if you find yourself in some financial difficulty in a particular month, it is recommended you pay at least the minimum due. This ensures there are no late payment penalties, which could negatively affect your credit score.

  1. Use the card for budgeting

If you are sure that you will be able to use credit cards responsibly and make timely payments of the entire bill, a card may be used as a budgeting tool. You may be able to analyze your monthly spending to see where you are able to save some money. However, it is important you never let the spending get out of control to avoid debt trap in the future.

  1. Protect yourself against fraud

Although protecting yourself against all kinds of frauds or scams is difficult, it is important to be cautious. Following some basic precautions will help you against possible frauds.

  1. Remain within a certain credit limit

One way to improve your credit score is to maintain a lower credit utilization ratio. It is recommended you maintain the credit utilization ratio of 30%. This means that if the available credit limit is INR 10000, you must not spend more than INR 3000 on all your cards. You must keep track of all your spending on different cards to remain within a certain credit limit.

It is common that you may use your card for most of your purchases. It is recommended you choose a good rewards card. This will help you accumulate points on every purchase you make using the card. These reward points may later be used to purchase items. Some cards may offer cashback or allow you to accumulate airline miles on your spending.

To ensure you use your card responsibly, you must never give in to the temptation of spending more than you are able to repay without facing financial difficulties.

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