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Smart usage of credit card: How can you reap maximum benefits?

There is no denying that credit cards offer multiple benefits to users in the form of reward points, discounts, cash-backs, etc. However, going against its disciplined usage can land one into serious debt traps.

Gaurav Gupta
30th May 2019
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Gaurav Gupta, Co-Founder & CEO, Myloancare.in.

Gaurav Gupta, Co-Founder & CEO, Myloancare.in.


India has a huge populace of credit card owners who see it as a necessity to carry on with their day-to-day transactions. The country comprises 46.1 million credit card owners at present. However, it also houses several individuals who feel reluctant to use credit cards, majorly due to the fear of overspending. There is no denying that credit cards offer multiple benefits to users in the form of reward points, discounts, cash-backs, etc. However, going against its disciplined usage can land one into serious debt traps. It is easy to find plenty of such examples within your friends and family.


Here are some tips that one must keep in mind to use credit cards effectively.


Make full payments


One should make it a habit of paying off debts in full instead of carrying it over to the next cycle.

Delaying the payment of a due amount to the next billing cycle will only incur high monthly interests that can range from 2.5 per cent to as high as 4 per cent. Also, each card has an interest free period which will continue if you are making full payments each month, but as and when you fail to pay off the debt, it will start levying interest not only on the remaining balance but also on each purchase you make using the credit card. As a result, you will end up paying more than the actual price of your purchases. Therefore, it is, advisable to promptly pay off your credit card bill each month.


Cash withdrawals? No!


One should understand that withdrawing cash from a debit card and credit card are two different

things. While cash withdrawal through a debit card gives you a few free monthly transactions, doing so through a credit card comes with two types of charges – one-time fee and interest charges. Hence, cash withdrawals using credit cards have to be used as a last resort.


Track and redeem your reward points


There are several rewards that credit card companies offer to a user. Some cards offer gift vouchers like free access to airport lounges, some offer huge discounts on buying electronic gadgets and some offer reward points that can be redeemed as discounts. Moreover, being a credit card user, one must know how and when to redeem points to reap the maximum benefits. Many people fail to check their reward points regularly and let their reward points expire, which is a missed opportunity to maximise the credit card benefits.


Take a loan after building a strong credit history


Credit cards offer unsecured personal loans as well. It is only in case of emergencies, one should use the card for taking such a loan due to high-interest rates, instead of looking for other ways. However, one should make sure that’s/he reads all the terms and conditions with open eyes, ears and mind as the charges can be exorbitant.


Carefully check credit card statement


Make sure you check your credit card statement by ticking off each time you have purchased

through it against the amount you have been charged for it. This will ensure that you have been charged for the right amount. Keep your purchase receipts safely as it will help you in an effective check. In case you miss to keep the receipts or lose it somewhere then you must check these four things in the statement.

• Any unusual or high amount of charge

• Any duplicate charge

• Charges appearing from companies you do not recognise

• Any change in the direct debit amount.


Make sure you activate auto-debit mode for payments


It is always advisable to link your bank account with the credit card to ensure bills are automatically paid on time. Because there are times when one forgets to repay on the due date and becomes a victim of late payment fee as well as an intentional hit on the credit score. Auto-debit is a perfect solution to avoid such situations. But make sure that the amount debiting is always more than the minimum due amount.


Never use it to meet ends


In emergency situations when you are running low on cash, using a credit card will help you get

through that immediate crisis, but it will come to haunt you over a longer period. Instead of relying on your credit card, it is recommended to build a savings buffer that can help you get through in situations of the cash crunch.


What else?


While it is a cliché that a credit card tends to increase one’s purchasing power, it is also important to note that overspending and payment delays can completely turn the household budget upside down. Which is why it is always advisable to choose the credit card whose offers resonates with your spending habits, read and understand all the terms and conditions mentioned, and then smartly leverage it to reap the best out of it.



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