How to use your credit card wisely

How to use your credit card wisely
2 min read
22 May 2023

Among many payment options, credit cards are the most preferred option due to obvious reasons like credit limits and unique perks. They offer the freedom to buy anything we want without worrying about the upfront or immediate payment. Besides this, credit cards come with great rewarding programs in the form of welcome bonuses, rewards points, discounts, complementary items, cashback points, and much more. From paying rent to paying for expensive phones, gadgets, and travel expenses, there is literally everything you can use credit cards for. These days, credit cards even allow you to withdraw cash or take emergency cash. But misusing or overusing your credit card can get you into a debt trap.

The new cardholders are often unaware of how to use a credit card efficiently in that way maintain a good credit score. If you are reckless while using the card, you may end up messing up your finances. It is important to use the cards optimally and pay your dues on time to continue enjoying the benefits.

8 Tips on How to Use a Credit Card Wisely

Below are the 8 tips to show how you can use your credit card to enjoy the maximum benefits -

  • Know your credit limit
    A credit limit is the maximum amount of money you can borrow on the card. Exceeding it can lead to penalties and harm your credit score. Knowing the credit limit can help you plan your spending and budget accordingly. This way, you can use your credit card as a valuable financial means while avoiding potential pitfalls.
  • Keep track of your credit report
    Your credit report contains information about your credit history. By checking your credit report regularly, you can track your spending, catch errors or unauthorised charges, and avoid exceeding your credit limit. A good credit report can help you qualify for better interest rates and credit card offers in the future.
  • Choose a rewarding credit card
    Rewards are probably the most beneficial part of the credit card. With a high-reward credit card, you can earn amplified rewards in the form of welcome bonuses, cashback, points, or miles upon making purchases with the card. You can accumulate these rewards and use them for your future spending and increase your overall savings.
  • Time your purchases
    Every credit card has a unique credit billing cycle. It is wise to understand the billing procedure, so you can time your purchases and enjoy an extended interest-free period. For instance, if your card has a monthly billing system and you make a purchase after the bill generation, you will have a 45-day interest-free period.
  • Pay your credit card bill on time
    Paying your credit card bill on time is critical for maintaining a good credit score and avoiding financial penalties. Late payments can result in fines and interest charges as well as hurt your credit score. It can also lead to difficulty in future loan approvals. On the contrary, if you pay your bill on time each month, you can enjoy additional benefits, including increased spending limits and lucrative offers on loans. You can set up monthly reminders or automatic payments to ensure you never miss a due date and keep your finances on track.
  • Read the terms and conditions thoroughly
    To use your credit card wisely, it is extremely critical to read and carefully understand the terms and conditions. Credit card fees can add up quickly, so knowing what fees apply to your card is essential. If you have any questions, contact the credit card issuer for clarification.
  • Never exhaust your credit limit
    Exhausting your credit limit can have negative consequences for your credit score. You must remember that your credit limit is different from the spending limit. If you exhaust your credit limit, you can incur over-limit fees and damage your credit score. By avoiding the temptation to exhaust your credit limit, you can maintain good financial health.
  • Use your card at trusted merchants
    Always shop for products or services from the platforms you trust (online and offline). Avoid using your credit card for payments at unauthorised websites or local stores that seem suspicious. It will safeguard your card details from being misused.

Naturally, thoughtful handling of a credit card offers exceptional benefits and improved financial stability. So, it is crucial to understand the dos and don'ts of using credit cards. Once you start using this tool wisely, you can get more value from it.

Frequently asked questions

What is the most efficient way to use a credit card?

Here are the most important steps to use your credit card efficiently

  1.  Pick a card as per your requirement and lifestyle
  2. Take time to understand rewards and cashpoints
  3. Pay your credit card bills on time
  4. Don’t settle for the minimum payment
  5. Keep your credit card details secure
  6. Pay attention to the joining and renewal fees
How to use a credit card to get good credit?

Credit cards can help you improve your credit only if you use the credit card wisely. Here are 5 tips to build a good credit score

  1. Use your credit card at least once a month. It may speed up the process of building your credit score.
  2. Use only a small part of the available credit on your card.
  3. Ensure that you pay your credit card bills on time
  4. Pay off your credit card bill in full each month.
  5. Maintain a good payment history by clearing the dues within the billing cycle
How do I use my first credit card wisely?

If you have recently gotten a new credit card, follow these simple tips to use your 1st credit card wisely.

  1. Use your credit card for small purchases every month and keep paying the bills on time
  2. Clear your bills in full every month well within the credit card billing cycle
  3. Avoid converting your purchases into EMIs every time
  4. Avoid minimal payment option
  5. Earn high reward points by using your credit card and utilise them
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