New Credit Card users are sometimes found nervous about falling into a debt trap. These users fear impulsive purchase. However, Credit Cards need not be as fearsome as they are made out to be. In fact, if used judiciously, a Credit Card cannot only prove to be a great financial tool to manage payments at an incredible ease, but also an enjoyable way to earn great value back offers. In order to reap the intended benefits of Credit Cards, users must have in-depth knowledge about them.
If you happen to have a new Citibank Credit Card or any other credit card for that matter, here are some interesting and useful facts that you ought to know before you start swiping your way through!
- Cash Withdrawals can Prove to be Expensive
More often than not, your Credit Card provider will suggest that withdrawing cash from your Credit Card is as convenient as it is in case of your Debit Card. While that is true, you must understand that cash withdrawals from your Credit Card do not come with an interest-free period, and you are liable to pay interest on the amount, right from the day money is withdrawn. Considering that your Credit Card can incur a high-interest rate ranging from 30-42% per annum (if the amount is left unpaid), the withdrawal should be exercised only for emergency requirements.
- Use Your Credit Judiciously
Thanks to the incentives in the form of reward points, you will often be tempted to spend more using your Credit Card. While this is not an issue, you should understand that every penny you spend using the card, needs to be paid back on time, else it will start accruing interest. Hence, make sure you use the card just enough to enjoy the reward points, but not more than you can pay for in full. It is this balance that will help you stay out of a debt trap, for as long as you would want.
- Pay Your Dues on Time
Right from the day you get your first Credit Card bill, make sure to pay all your bills, in full and on time. Credit Card providers often give a tempting alternative of paying only 5% of the bill, which helps avoid the late fee, but if you just pay the minimum amount, you will be liable to pay the high-interest rate on the outstanding amount.
- Enjoy the Interest Free Period
When you use a Credit Card to make payments, typically, you are entitled to a 45 to 51 day span of the interest-free period. It is crucial to understand that this period can be enjoyed only if there are no outstanding bills. Hence, make sure to pay your bills in full every time, to revel in the much sought-after advantage of interest-free period.
- Automate the Payments
In order to enjoy an interest-free credit through the year, you can automate the payment of your Credit Card bill. You can do so by giving standing instructions to your bank or by merely setting up the Electronic Clearing System for your Bajaj Finserv Credit Card account or any other Credit Card account for that matter. This step will help in the efficient management of your debt.
- Make Use of The EMI Alternative
Ideally, you should not spend more than 30% of your monthly credit limit using your card. However, if you need to make a big-ticket purchase using the card, make sure to opt for EMIs. Not only will it lower the onus of payments, but will also ensure that the interest levied is rather less, making it a win-win situation for you.
- Use the Balance Transfer Facility
In some cases, despite your best efforts, your Credit Card bills may mount more than you’d like them to. If you have more than one Credit Card, opt for the balance transfer facility, and transfer the outstanding dues to the card with the lowest rate of interest. While doing this will help you save some money that would otherwise go towards the high interest, you should still prioritise the payment and get rid of the debt at the earliest possible.
- Pay Off Your Debt
If you don’t have multiple Credit Cards and have some accumulated debt, it is reccomended to plan your personal finances so that you can pay off the debt as soon as possible. Not only will it help keep your credit score secure, but will also help you get rid of the obligation at the earliest possible.
- Consolidate Your Debt
When no other way seems feasible to pay off your outstanding dues, you may opt for a Personal Loan to consolidate your Credit Card debt. While it may seem like another debt to take care of, you will benefit from the comparatively lower interest rate levied on Personal Loans. Many people are unaware of this way out, and hence struggle for long periods of time before the debts are paid off!
- Maintain a Healthy CUR
Credit Utilisation Ratio or CUR is the ratio in which one uses their Credit Card to that of their monthly credit limit. Hence, if your card comes with a credit limit of Rs. 1 Lakh and you spend Rs. 20,000 using the card, then your CUR is 20. Ideally, you should maintain a CUR of 30. This indicates that you are financially disciplined and not excessively dependent on credit to meet your everyday expenses.
We hope that you now know some incredibly helpful facts about Credit Card usage, and will use it in the most efficient manner possible!