MUMBAI :Among the most important and powerful financial tools, credit cards rank at the very top. Apart from the credit line that you can use to purchase products and services, credit cards help you build your credit profile. These plastic cards are multifaceted, and credit card benefits are wide-ranging; you can use them for shopping, travel, dining, and various other purposes. You can earn cashback, reward points, or travel perks such as air miles, depending on your credit card type.
Most savvy users know how to maximise credit card benefits. Even before applying for a credit card, you must know which type of card you want based on your lifestyle and spending behaviour. This allows you to align credit card perks with your spending pattern so that you can make the most of the card’s features. Concomitantly, you must avoid overspending and avoid falling into the dreaded debt trap.
If you are planning to apply for a credit card, here are a few tips and tricks that will help you better manage your spending, and make the most of the credit card features.
Know Your Spending Habits
Your credit card should complement your lifestyle and spending habits. For instance, if you are a globetrotter or travel frequently, you must opt for a credit card that provides travel benefits. If you drive long distances or use your personal vehicle for work commutes, get a credit card that offers fuel surcharge waivers. If you find yourself frequently browsing e-commerce platforms, apply for a shopping credit card that provides exclusive discounts.
Know Credit Card Bonuses
To attract more customers, certain banks extend credit cards that are loaded with bonuses. For example, when you apply for a credit card, you might receive a welcome bonus if you spend a certain amount within a specified period. Depending on the credit card variant and its target audience, you can receive gift vouchers, complimentary annual memberships to exclusive clubs, and discount codes.
Always Pay Your Bills in Full
One of the cardinal sins of credit card use is not paying the total outstanding amount. While you can pay the minimum amount due sporadically when you do not have the funds, you must always try to pay the entire outstanding amount. By doing this, you can avoid accumulating interest charges and penalties. Moreover, you can improve your credit score by making timely payments – an underrated and often overlooked benefit of owning a credit card.
Keep an Eye Out for Exclusive Offers and Updates
Credit card issuers often extend exclusive offers and provide monthly updates, which can help you maximise your credit card benefits. You should stay on top of such updates, and sign up for the bank’s newsletters. For example, during festive seasons, financial institutions offer 5x rewards on online spends or give e-vouchers. These offers are intended to increase credit card usage during these periods, and you must keep an eye out for such announcements.
Change the Billing Cycle Dates
If you’ve applied for multiple credit cards, you have to remember different credit card billing cycles, which can be a hassle. You can streamline your payments by requesting the lender to change the billing cycle, so that the billing cycle dates of all the cards align with each other. This simplifies the payment process, and you can pay your credit card bills simultaneously. By paying your credit card bills on time, you can improve your credit score and build your credit profile.
Monitor Your Credit Utilisation Ratio
Last but not least, it is essential that you monitor your credit utilisation ratio. This ratio illustrates the amount you spend against your credit limit. For example, if you have two credit cards whose combined credit limit is Rs.2 Lakhs, and you spend a total of Rs.1 Lakh on purchases, your credit utilisation ratio will be 50%. Conventional wisdom suggests that you keep your credit utilisation ratio under 40%. Using your available credit line extensively for purchases increases your credit utilisation ratio, and negatively affects your credit score.
Conclusion
When you apply for a new credit card, you step into a whole new world of convenience and comfort. However, you must obtain a credit card that aligns with your spending behaviour, and complements your lifestyle. Ensure that the rewards and benefits the credit card extends are relevant to you. At the same time, you must use your credit card judiciously, and not exhaust the available credit limit. By being vigilant and sensible, you can maximise your credit card benefits and improve your credit score.
