As with habit, it is necessary to nudge yourself and abide by your commitments of using your credit card responsibly. With a visual goal of building credit history and improving your credit score, adopting these credit card habits can assist you to be where you would like to be.
Apply for a credit card that matches with your spending needs:
Some of us spend most on travelling, while others spend on groceries, shopping and monthly bills. Therefore, before applying for a credit card, it is necessary for you to analyze on what you spend the most.
Most of the credit cards come with different benefits and reward programme. You must go for the card that gives you the best value for something on which you spend maximum.
Balanced utilization of credit limit:
Credit limit overuse is considered a harmful habit as you splurge more than your repayment capacity. Ideally, you must not utilize more than 40% of your credit limit. Crossing your credit limit might bring down your credit score.
Plan your credit card spends according to the interest free period:
The time span between the credit card transaction and due date of its payment is called interest free period. This period can go up to 55 days. Credit card transactions do not entice any interest during this period as long as the outstanding amount is repaid on or before the due date. Therefore, you must plan your bigger spends in such a manner that you get maximum interest free period on the same.
Pay credit card bills in full and on time:
Financial institutions do not charge interest if you pay your outstanding credit card debt on or before the due date. However, late payment of bills is dangerous in a lot of ways. Firstly, your credit score gets affected, secondly, you pay late fee every time you miss your payment date.
Also, you get the option to make minimum balance payment that is 5% of your balance due. Minimum balance payment is a catastrophic option, as it might land you into a debt trap. You must use this option only during emergency situations as going for this option might make you pay huge interest.
Do not let your credit card reward points expire:
Active utilization of credit card garners you with reward points. You must keep a track of your earned rewards and use it in full as most credit cards’ reward points come with an expiry date.
Monitor all international transactions:
Most of the financial institutions charge between 1.5% and 5% foreign transaction fee at POS or online. You must opt for the credit card that charges least transaction fee for conducting your regular transactions in abroad.
Change your PIN on frequent basis:
Cyber security threat impends over financial tools. Credit cards are vulnerable to misuse. The information of the credit card stored on online portals can be used for unlawful transactions. Hence, you must frequently change your PIN and use an authentic website for making the payment to avoid fraud.
Responsible and healthy credit card habit can assist you to build a good financial history. Your financial standing can ameliorate as you begin to concentrate less on overspending, plan a budget and pay your credit card bills in full and on time.
Sahil Arora – Head, Payment Products – Paisabazaar.com
