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How To Use Credit Cards Responsibly Without Running Into A Huge Debt

Avoiding debt while using a credit card can be very tricky. People often get carried away by the concept of FREE money. It is quite easy to run into a credit card debt. More often than not, it takes several years and a lot of sacrifices to ultimately pay it off.

Many people do not realize that maintaining a high credit balance is a recipe for disaster. In case of emergency, possessing a high balance will reduce your flexibility to use a credit card. This, in turn, increases the chance of going further into debt.

Here are 10 tips on using a credit card responsibly:


  1. Fight the urge to splurge

The famous rapper JayZ once said in an interview, “You can’t afford something unless you can buy it twice”. Even though the idea seems quite restrictive, it is still a very good idea to take a step back and make sure that the item you are paying for is something you can actually afford before you swipe the card. If you are the kind of person, who routinely overspend, and blow your budget in spur-of-the-moment purchases, then it may not be a good idea to keep a credit card.


  1. Don’t miss credit card payments

Missing a credit card payment can put a huge strain on your budget. Because you the very next month you will have to make the double the payment along with late fees. Moreover, missing a payment can considerably reduce your credit score. Because, a history of late payments could suggest to creditors that you are a risky borrower. In case, if you fell behind a payment due to an unexpected financial emergency, or simple forgetfulness, make sure to pay it as soon as possible to reduce the damaging the effect it has on your credit score. Consider using automatic payments or electronic reminders.



  1. Make full payments each month

Your credit card balance is the amount of money you owe to your credit card company at the end of the month. You might be tempted to make the minimum amount of payment every month. The best way to avoid credit card debt is to pay off the credit card balance every month. This way, you can avoid the high interest rates associated with the positive balance. This also means that, you are spending within your means.


  1. Pay more than the minimum balance

If you don’t have enough to pay off the credit balance every month, make it a point to pay more than the minimum balance. Just like missing payment, maxing out a credit card does no favors for your credit score. Paying more than the minimum amount demonstrates your commitment to pay off the debt. It will also help you to put a considerable dent on your overall balance and reduce the credit utilization ratio, which will improve the credit score.


  1. Say NO to cash advance

Cash advance is the technical term for the cash withdrawal feature available on credit cards. Just because you can doesn’t mean you should. It’s the first red flag on your journey to inevitable credit card debt. Using a credit card for cash is a sign of financial trouble and the inability to manage money. Cash advances typically do not affect your credit score. However, cash advances come with high interest rates and additional fees.  This may cause the balance on the account to grow quickly, making it difficult to keep up with monthly payments. Likewise, if you find yourself using your credit card for regular living expenses, understand that you are heading for a financial disaster.



  1. Find the card that best suits your needs

Understand your spending patterns and leverage the various rewards offered by credit card companies. Credit card companies offer a host of discounts and offers across dining, shopping, travel, fuel, entertainment, and more. Compare various credit card rewards and choose the one that matches your spending habits. This way you can maximize your benefits and become eligible for various cashback offers. Here a few parameters to look for while looking for the perfect credit card.

  • Welcome Gifts – For example, when you sign up for an SBI SimplyCLICK card you get ₹ 500 Amazon Gift Voucher as a welcome benefit.
  • Low Annual Fee – The annual fee of maintaining an SBI SimplyCLICK card is just Rs 500. SBI SimplyCLICK also provides E-vouchers worth ₹ 2,000 each of reaching annual spends of ₹ 1 Lakh and ₹ 2 Lakh.
  • Useful Reward Programs – If you eat out a lot, you can go for an Amex card, they offer 20% discount at partner restaurants across the country.


  1. Avoid multiple credit cards

It becomes quite difficult to track overspending, when you are using multiple means like cash, debit, and credit card. And the complexity of keeping tabs on spending amplifies, if you are maintaining multiple credit cards. The more you have, the more you will charge. Limit the number of cards you hold to one or maximum two. Cut up the rest to avoid the temptation of having thousands of dollars in available credit. It is also a good idea to use a money management application or software to keep track of how much you spent every month.


  1. Understand the terms and conditions

Make an effort to understand how your credit card agreement terms work. Get a grip on interest-free grace period, avoiding interest charges, how interest charges are calculated, minimum monthly payments, late payments etc. to avoid incurring additional charges due to ignorance.



  1. Do not carry your credit card with you

Not having the credit card in your hand will remove the inclination to spend impulsively. Instead, use your credit card only to make planned purchases. Also, learn the habit of saving up for a major purchase as an alternative to simply swiping the plastic. Another tactic is to limit what you use for a credit card for. Assign few expenditures like magazine subscriptions or set monthly bills that do not vary a lot from one month to next to keep your credit card usage under control.


  1. Have a budget

Make a monthly budget and stick to it. Even though it is tough to carry out, the financial benefits it provides, in the long run, are worth it. It is equally important to have an emergency fund. Financial gurus suggest that, you should have three months of living expenses in your emergency fund. Having a proper budget might even eliminate the need to have a credit card in the first place.


Bottom line: Maintaining is a credit card is a huge responsibility. Try paying the full credit balance every month. If you are unable to do so, it’s time to revisit your financial plans and goals. Do not be carried out by the allure of being able to spend more than you have.

Also Read: Here is why you should start investing early

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