India has seen a boom in credit card spending, especially after the outbreak of the Covid-19 pandemic.
According to data from the Reserve Bank of India, in May, total credit card spending in the country hit a record high of 1.14 trillion rupees. Be it reward points, rebates, or credit card cash back, people prefer online transactions these days.
Credit cards also allow cardholders to spend money without worrying about their bank balance.
However, being careless with your credit card spending can also have a negative impact on your personal finances.
Practices such as delaying credit card bill payment will not only result in penalties, but will also impact your credit score. Therefore, it would be better to remember some things before swiping the card.
Here are some tips to help you make better use of your credit card:
Swiping the credit card is easy, as is checking statements. But, many still tend to avoid checking their dues and credit statements every month.
Adopting this habit can help you keep track of your expenses. This will allow you to spot errors and correct them before they have a negative impact on your credit score.
Paying your credit card bills on time should be your top priority. Late bill payments can result in penalties and increase the interest rate on your unpaid bill. Avoid this by setting up reminders for bill payments.
Don’t slip it so often.
Credit cards have some advantages, but swiping them too often can leave a bad impression on your lender.
Relying on your credit card for small expenses indicates that you are heavily dependent on credit. This can affect your creditworthiness.
Lenders are always monitoring your credit card transactions and may refuse to approve new loans if you have a huge outstanding credit card.
Monitor Credit Utilization Ratio (CUR)
CUR is the ratio of the credit you have used to the total credit given to you by the lender and is usually expressed as a percentage.
It’s important to maintain a healthy credit score because a high CUR can lead your lender to assume that you’re mismanaging your finances and highly dependent on credit.
To avoid this, pay off your credit card balances on time or upgrade to a higher credit limit with the bank.
Spend within the limit
Spend only when you are sure to repay the amount on time. Overspending on unnecessary purchases can rack up a huge credit card bill that you may struggle to pay later.
It’s best to keep spending under the limit, which will also reflect in your credit report and prove beneficial when looking for loans.