Credit cards are convenient for managing money, establishing a credit history, and earning rewards. Yet, for those new to using them, it is important to understand how to use them correctly to avoid debt and reap the most rewards. The following article offers guidance on using credit cards wisely, particularly online credit cards, and how to read your statement.
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Select the ideal online credit card
The first step to choosing the right credit card is considering your spending pattern and financial objectives. For example, if you tend to shop online, seek cards that provide cashback or rewards on online shopping. Many banks permit you to apply for an online credit card from their websites or mobile apps, making the application easy.
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Understand your credit card statement
Your credit card statement is an overall record of your card transactions. Important features include:
- Statement date: It is the day the statement is generated.
- Payment due date: The date by which you should pay your dues to avoid being charged late fees.
- Total amount due: The total amount due for the billing cycle.
- Minimum amount due: The minimum amount you must pay to maintain the account.
- Transaction details: A summary of all purchases, payments, and credits made during the billing period.
Reviewing your credit card statement every cycle helps track expenses and detect unauthorised transactions. You must pay more than the minimum due to prevent the accumulation of interest on the outstanding balance.
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Pay your bills on time
Pay your credit card bills on time to maintain a good credit score and prevent late payment fees. You may set up auto-debit instructions or reminders to never miss a due date. Paying only the minimum amount is not recommended, as the unpaid balance will continue to accrue high interest.
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Monitor your credit utilisation ratio
The credit utilisation ratio is the percentage of your credit limit that you are utilising. To maintain a healthy credit score, it is advisable to keep this ratio under 30%. For instance, if your credit limit is ₹1,00,000, keep your outstanding amount below ₹30,000.
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Avoid using credit cards for cash withdrawals
The process of withdrawing cash via a credit card can have hefty interest rates and additional fees. It is better to use credit cards only for purchase transactions and use debit cards or other options for withdrawing cash.
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Use reward points and available offers
Every credit card offers reward points, cashback, and deals on different transactions. Familiarise yourself with your card’s reward system and exchange points before they expire. This is a significant money-saver.
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Review your credit card bill
Apart from understanding your credit card statement, reviewing it periodically for blunders or misuse is equally important. If you spot any errors or misuse, inform your bank at once. This will avoid fraud and keep your finances in check.
Conclusion
Mastering credit card usage requires understanding your card’s features, tracking expenses, and making timely payments. Paying attention to your credit card statement and wisely using your online credit card can help you obtain the benefits of your card while maintaining financial stability.
