Did you know credit cards first appeared in India in 1961, introduced by businessman Kali Mody. The Central Bank of India introduced its credit card about 20 years later. Back then, credit cards were not well-known and hard to use.
But now, with technology making things easier, over 73 million credit cards have been issued in India. A big reason for this is cashback offers. People often buy things just because of these offers, which can lead to rising credit card debt.
Credit cards can be very useful, but you need to use them wisely. This blog is here to help you understand how to benefit from your credit card without letting banks take advantage of you. So, let’s get started.
13 Ways to Use Credit Cards In Your Favor
1. Turn Everyday Spending into Big Wins:
Many credit cards give rewards like cashback, points, or miles for every rupee you spend. Use your card for daily purchases and pay off the full balance each month to earn rewards. You can use these rewards for travel, gift cards, or to lower your bill.
2. Building a Strong Credit History:
Using a credit card responsibly can help you build a good credit history. Pay on time and keep your balance low to improve your credit score. A good credit score can help you get loans or mortgages more easily in the future.
3. Maximize Your Introductory Period:
Credit card companies often give special bonuses like 15% off your purchase or low-rate balance transfers for a limited time. Use these offers to save on interest or move high-interest debt to a card with a lower rate.
4. The Safe and Easy Way to Pay:
Credit cards make it easy and safe to shop online and in stores. They often include fraud protection and purchase insurance, giving you extra peace of mind when making big purchases or shopping in new places.
5. Effortless Expense Tracking:
Using a credit card for daily expenses helps you track your spending with monthly statements and online tools. This makes budgeting easier and helps you see where you might be overspending.
6. Unlock Exclusive Benefits:
Many credit cards offer extra benefits like extended warranties, rental car insurance, and travel insurance. When you use your card for eligible expenses, you get these perks for free.
7. Deal With Unexpected Expenses:
A credit card can help with unexpected expenses or financial problems. While it's good to have emergency savings, a credit card can offer extra financial support when needed.
8. Convenient and Secure Alternative:
Carrying cash can be risky and a hassle. Using a credit card for everyday purchases means you don’t need to carry much cash and reduces the chance of losing it or having it stolen.
9. Stress-Free Bill Management:
Setting up automatic bill payments with your credit card helps you pay your bills on time and avoid late fees. Just make sure to check your account regularly to ensure you have enough funds for the payments.
10. Strategic Credit Card Use for Investing:
Sometimes, you can use your credit card’s available credit for short-term investments. For example, if you find a great investment opportunity but don’t have the cash right now, you might use your credit card to fund it and pay off the balance later when you have the money.
11. Autopilot Your Investing:
You can set up automatic investment payments with your credit card. Many investment platforms have the option to link your card for regular contributions. This makes investing easy without needing to manually transfer money from your bank account. Just ensure you have enough funds to cover the payments and avoid building up debt.
12. Save Money on Interest:
Transferring high-interest debt to a credit card with a lower or 0% introductory rate can save you money on interest and help you pay off debt faster. Make sure to check for any fees and have a plan to pay off the balance during the lower rate period. This can also free up cash for investing.
13. Set An Ideal Credit Limit:
To set the right credit limit, balance your spending, income, and financial goals. Keep your credit use below 30% to maintain a good credit score. If your needs change, ask your card issuer for a limit adjustment and regularly check your credit use. A higher limit can be tempting, so stick to a budget and avoid spending more than you can afford to get the most out of your credit card.
The Credit Card Don'ts You Need to Know:
Knowing how to use your credit card is important, but it's equally crucial to understand what not to do with it. This can help you avoid making mistakes, even unintentionally.
1. Ignoring Statements: Not checking your credit card statements can lead to missing fraudulent transactions or charges.
2. Late Payments: Missing a payment can cause late fees, higher interest rates, and harm your credit score.
3. Applying for Too Many Cards: Applying for new credit cards too often can hurt your credit score and cause unnecessary inquiries.
4. Closing Old Accounts: Closing old credit card accounts can shorten your credit history and might lower your credit score. Do not do this unless necessary.
5. Not Paying Attention to Fees: Watch out for annual fees, foreign transaction fees, and other charges on your credit card.
The Next Steps Are Yours To Take
I’ve covered all the important points, but it's up to you to put them into practice. Just as it's easy to over-eat when your favorite food is in front of you, similarly it's easy to over-use credit cards when spending is convenient.
Always stay conscious when using a credit card and remember that you’re spending borrowed money. So, keep these tips in mind and use them wisely.
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