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    Categories: Credit Cards

Can You Make Your Credit Card Work For You? Here’s How To Do It

Have you ever thought how you can you make your Credit Card really work for you. If yes, that’s great! If not, no worries! Here you shall learn simple ways on how to do it as well as ideas to enhance your CBIL or credit score.

Credit card usage is on the rise in India. According to the recent TransUnion CIBIL survey, 59 percent of consumers use their credit cards more than they did last year and 19 percent of them are likely to apply for one in the future.

Although credit card penetration is still relatively low compared to its global counterparts, shoppers in India are becoming comfortable with the concept, and perhaps a bit reliant on its use in managing their personal finance each month.

Much negative press has been given on the use of credit cards lately and its role in the rising consumer debt epidemic. However, what hasn’t been discussed is the answer to the credit card issue: proper management of your credit card.

Simple, savvy financial habits can make your credit work for you and not the other way around, helping you avoid the all too common pitfalls of consumer credit and even improve your CIBIL or credit score.

How to Make Your Credit Card Work for You?

1. Make Your Credit Card Balance A Part Of Your Monthly Budget

A great way to maintain a tight grasp on your credit card spending habits is to use it for prepaid bills. This means using your card for bills included in your budget and paid each month anyways. This allows you to experience two benefits; purchases on your card means you get the added rewards and you can then use your cash to make the credit card payment.

Therefore your balance remains null or minimal, interest charges are avoided. And of course, your credit utilisation remains a favourable ratio and your credit standing remains intact. In recent years, research has shown that Indian consumers know very little about their credit scores and histories although this has increased since then. Around 62 percent did not know lenders checked credit scores when considering a loan.

Moreover, creditworthiness also plays an important part in a simpler acceptance process for further consumer credit.

2. Set an Alert to Avoid Late Payments

Late payments are one of the top mistakes that affect consumer’s credit standing and drive up the cost of holding a credit card. With late and missed payments come penalty fees and added interest charges. And with interest rates in India averaging 41 percent, consumers are already carrying a hefty cost to using their credit cards. Not to mention banks also tend to charge a Goods& Services Charge (18 percent).

The good news is that mobile technology can help you stay on top of your payments and sync it with your budget including your pay dates. Mobile budgeting apps like mTrakr and Money View along with some banking and credit card apps allow you to set an alert or preset payments to make sure you don’t miss the payment date. They also integrate your payment dates into your overall monthly budget. So you can get a true look at what your discretionary income is after all your monthly payments are made.

3. Set Spending Limits Each Month

Adopt a simple mantra when it comes to your credit cards: only spend in credit what your income can cover. This point highlights the importance of a well-done budget each month since a good budget means you are able to better grasp how much you have left after standard bills. You should then use this amount as a base when deciding what purchases to make using your card.

Remember, credit purchases means you are simply putting off paying the amount for a later time or splitting payments. At the end of the day, you do still need to make those payments.

4. Go for a Card with Perks relevant to Your Lifestyle

Credit cards with rewards and consumer perks are all the rage now and it may seem like a good idea at first. However, you want to choose a card that fits in with your lifestyle and finances, and this includes those rewards. If you choose right, you can end up relieving some of the pressure on your finances.

Consider what you will be using your credit card for and the rewards you can get from different credit providers. Around 59 percent of credit card users said they use their cards to pay their bills. While 45 percent of them opted to use their cards to harness the rewards and perks.

However, if you aren’t much of a traveller, then a credit card that gives airline or hotel points each month for purchases would be highly irrelevant. Similarly, those who opt to use their cards for routine shopping such as utility bills or grocery shopping would be better off gaining rewards such as cashback or in-store points for money off their next shop. This saves you money in other areas of your life such as food spend.

Like any other credit tool, having a credit card means taking steps to properly manage its use and avoid negative effects from bleeding into the other areas of your financial life. This means staying on top of your payments, knowing your limits and choosing the best credit card for the right purchases.

Do this and you can not only enjoy the use of consumer credit, but also witness the positive influence it can have on your life and your financial goals. Don’t forget to share any useful tips of making your credit card work for you. If you know some other ways of improving your credit score easily, feel free to add in the comments.

Harleen Kaur: A Chartered Accountant with 14+ years of experience in the Corporate world. A Finance & technology (a fintech) enthusiast, a passionate financial blogger, Founder @ Fintrakk.com and a Finance FAQ Portal. In short, a CA, a Bachelor of Commerce whose very foundation has been learning about finance. I am actively contributing towards the financial literacy goal through my business ventures and spreading awareness in the dynamic field of finance, investment, stock market, money savings, career and a lot more. Reading, learning & sharing interesting information, this is what I enjoy!! I have researched and written hundreds of blogs on Indian financial topics! Now, expanding my blogging horizon towards Personal Finance in Canada, and USA as well.
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