Credit cards are becoming increasingly popular in India owing to the benefits and the convenience it offers to the customers. But the higher interest rates and a lot of other added charges means you have to be careful while using them. Listed below are 5 logical tips of using the credit card appropriately and saving you from a whole lot of heartaches in future.
- Pay your balance in full: Though it is the basic rule that has to be followed by the customers using a credit card but most people neglect paying the balance in full. This is a bad practice and can result in huge payoffs. This means if you have a credit card balance that is charged at 30% interest rate per annum and an investment that gives you just an 8% return – you must better pay the entire balance in full before you even think of investing your money. The extra interest you pay on your remaining balance counterbalances any interest income you receive from your investment.
- Avoid credit cards with an annual fee: Never get a credit card with an annual fee unless you have a specific benefit in mind. Instead get a credit card with no annual fee (e.g., Kotak Mahindra bank credit card), because then the only expense you will have to bear, is the interest payment; and if you pay off your balance on time every month, you’ll not have to pay any interest and your credit card will, in fact, be free!
- Stay below your credit card limit: Use a credit card wisely. Just because a credit card gives you the convenience to spend as per your wish, doesn’t mean go over your credit card limit is fine. Your bank with charge a fee for it and increase your interest to a higher penalty rate. To avoid this, it is better you use your credit card wisely. If you use RBL credit card, you can even check your balance online.
- Keep a track of your statement: There are chances that your credit card statement includes transactions that were never made from your credit card and you may end up paying huge amount unnecessary. To avoid being a victim of such case, it is good to keep a track of your monthly statement. Read the statement carefully and check whether the transactions mentioned in the statement are done by your card or not. It is even better if you go online and check the transactions in advance.
- Never use your credit card as an ATM: Most people have the tendency to withdraw cash from their credit card and it is really addictive. Withdrawing cash from your credit card should be the last option. Treating your credit card as the easy and reliable way to get cash will not help you in the long run because first, the interest rates on cash withdrawal are much higher and second if you adopt this habit, you will have higher outstanding balance quickly. In addition to this, the interest rate will be adding up to your outstanding balance and you might face really a tough situation is paying off the loan debt in future.
These are a few significant tips that you must keep in mind while using your credit card. Also note that credit card companies like Kotak Mahindra, RBL keep changing the terms and conditions of your account including changes in fees, interest rates, billing, and other features. They ideally inform about these changes via mail but most people often ignore such emails. It is a bad practice. You must keep a check on such emails to decide whether you want to continue using that card or want to replace it with the better one that also offers good benefits.