There’s no doubt that credit cards are an excellent way for new-to-credit consumers having no Equifax cibil score yet, to build a good credit score through disciplined credit repayment history. Along with instant access to credit, they also provide attractive reward points, cashback, discounts, etc., which helps to reduce the cost of the transaction. However, these very same features often lure many to spend beyond their repayment capacity. With credit card interest rates soaring high at around 18–48% p.a., a credit card’s effect on your finances entirely depends on your usage and repayment behaviour. If used irresponsibly, they can turn nasty and have a detrimental impact on your Equifax cibil score, often leading to debt traps. To avoid such situations, use credit cards smartly to extract their benefits to the full.
Here are some easy & smart ways to help you use credit cards to your advantage and keep your credit score strong as well
Choose your credit card according to spending habits
Most credit cards focus on particular kinds of transactions and offer higher rewards on them. It is vital to analyze your spending habits and pattern in order to choose the card which offers maximum benefits for you. When you choose the card which compliments your spending habits and lifestyle, you can take full advantage of the benefits and the offers it provides.
For example, if you are a travel enthusiast who also keeps a monthly check on cibil score online, then consider a suitable credit card that offers benefits such as air miles, lounge access and hotel vouchers on travel spends. You can also visit online financial portals to compare various credit cards and choose the one that suits you the most.
Use a credit card for daily expenditure
Using credit cards for making day to day payments is a great & smart way to keep track of your daily expenses and also earn rewards, discounts and cash backs on every purchase. Regular usage of credit cards also helps in building a credit history for those who don’t have it yet and lengthens it for the existing ones. Make sure you always do pay your credit card bills in full and before the due dates, as failure to do so would incur high-interest costs usually ranging anywhere around 18-48% and hurt your credit health too when you check your cibil score online and get to know that irregularity in repayment damaging your score. In case you made a large volume purchase and won’t be able to pay it off in full before the due date, opt for conversion of such transactions into easy EMI payments. These come with attractive interest rates and tenure ranging between 3-24 months generally.
Opt for multiple credit cards
Credit cards generally involve an upper cap imposed on the number of rewards and benefits that can be credited during a particular billing cycle. Opting for multiple credit cards will enable you to maximize rewards points on different types of transactions and also ensure that you continue to earn benefits on your purchases even after crossing the upper cap on your primary card. Having multiple credit cards also increases your total credit limit, which lowers your credit utilization ratio and thereby improves the Equifax cibil score as well. When holding multiple cards, make it a habit to also check your cibil score online from time to time, ideally, every month, to ensure you remain on track to build and maintain a good credit score.
Accumulate and use rewards wisely
Credit card issuers and merchants offer cash backs, attractive discounts, and reward points as incentives to promote credit card usage. On every transaction you make through credit cards, you are given rewards depending upon the type of credit card you hold. The value of reward points varies from issuer to issuer. However, reward points do not last forever and usually expire after a certain period. Be alert and vigilant in keeping track of your rewards and make sure you redeem them before they expire. Also, its better to make it a habit to always check your Equifax cibil score every month to stay updated regarding your credit repayment history.
Plan your expenditure according to your interest-free credit period
Besides developing the habit of monthly checking of cibil score online, credit card users should also utilize interest-free periods prudently too.
The interest-free period is the period during which your purchases are interest-free, i.e. you don’t have to make any interest payment on your purchases for that period. But this holds true only if you have paid the previous month’s closing balance in full. If you didn’t, then interest will keep on accumulating on your previous balance as well as any new purchase you make in the current billing cycle. Plan your purchases according to your billing cycle and due date to reap the benefits of this period. Make the bigger purchases at the start of your billing cycle in order to buy more time to repay them.
Request for a credit limit increase
Credit bureaus generally term a borrower with a credit utilization ratio over 30% as risky while computing the Equifax cibil score. A higher credit utilization ratio can be detrimental to your credit score, which can be visible when you check your cibil score online after a month or so post your credit limit increase. If you tend to breach this 40% mark frequently, request a credit limit increase on your credit card to lower down your utilization ratio, provided your card spend the same. Also, an enhanced credit limit will come in handy in case you fall short of funds during financial emergencies such as accidents, job loss or serious health issues.
Last but not least, let’s sum up by remembering that credit card debt is one of the worst traps to fall into. So why let credit cards become a bane when you can actually turn them into a boon for your financial health as well as credit score, in more ways than one. Follow the above-mentioned steps and just wait and watch how your finances keep getting better and better. also if you get choice you caninvest crypto bitcoins nfts to create wealth.