India has seen a remarkable shift in payment methods in the last couple of years. People have started using credit/debit cards, UPI payments more frequently in comparison to cash payments.

How to use your credit card in the right way

Post demonetization and Covid 19 pandemic, India has seen a steady transition of people moving from cash payments to digital payments. People are hesitant to handle cash transactions like never before. And the preferred mode of payment that came out of this transition is credit cards, leading to an increase in the use of credit cards in India. As per the data from the Reserve Bank of India, currently, there are approximately 52 million credit card users in India. There is also an increase in the trend of purchasing first and paying later. According to various reports, the Indian credit card industry is expected to grow at a CAGR of more than 25% during the years 2020-2025.

Using a credit card can be both beneficial and perilous according to its use. With the benefits that it provides, it is always enticing to use a credit card, but if it is not used responsibly, it can lead to a financial strain on an individual. Many people are falling into debt because of the irresponsible use of credit cards. But we also cannot deny that a credit card can act as a useful method to manage our finances, and improve our credit score.

So, what is the right way to use a credit card? We explore some ways in which we can use our credit cards smartly.

Credit Limit

If you have decided to get a credit card, it is always beneficial to get a higher limit credit card. Apart from getting a higher limit on transactions, it also helps in improving your credit score.

Low use on a higher spending card denotes that the user is not credit hungry, which contributes to improving the individual’s creditworthiness.

Know your Rewards

Credit cards provide rewards and benefits for specific transactions like free access to airport lounges, gift vouchers, welcome rewards, etc. Nowadays, credit card providers are also offering cards tailored for customer needs, based on their spending patterns. For example, if you are someone who likes to shop frequently, you should choose a credit card that is tailored for shopping needs.

Some of the best credit cards for online shopping are Bajaj Finserv Shop Smart SuperCard, Flipkart Axis Bank credit card, and Amazon Pay ICICI Bank credit card.

Pay Bills on Time

This is the most important aspect of using your credit card effectively. You should always pay your credit card bills on time. A delay in paying your bills will attract huge interest on your outstanding balance, hampering your credit score.

The Right Time to Purchase

Always try to make your purchase just after your billing date, as it provides you up to 45 days of the interest-free period. So, it’s always better to know your billing date beforehand.

Trusted Merchants

Always use your credit card at trusted merchants and retailers. This will help in preventing the misuse of your card.

Track of Credit Card Usage

Keeping track of the spendings of your credit card will prevent any unexpected transactions. If any unexpected transaction comes to your notice, you should always alert your bank.

The 30% Rule

Keep a habit of not spending more than 30% of your card limit. This will improve your creditworthiness, and also keeps your finances on track.

Credit is for Your Needs, Not Your Wants

Use your credit card for emergency situations. Unnecessary purchases can land you into debt. Always use the amount that you are sure of paying on the due date.

Joining and Renewal Fees

Credit cards often charge joining or renewal fees. Although, there are cards that offer zero joining or renewal fees. Try getting cards with no fees, and in case you are getting a card that charges fees, make sure that the benefits it offers to cover the fees. There are also some credit cards that allow fee reversal if you spend more than a certain limit.

Secure Your Credit Card Details

It’s very important that you never share your credit card details with anyone. With the increase of cyber threats, you can never be too careful.



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