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Credit Card Tips: A credit card is something that, if used wisely, can prove to be a very useful financial tool. Using a credit card correctly can increase your credit limit in the future and if you do not use the card properly, you can end up in heavy debt.
New cardholders need to activate the credit card
Whenever you get a new card, you are given 30 days to activate the card, followed by a grace period of 7 days. As per RBI guidelines, banks cannot create a new credit card account until the user activates it. Therefore, it is important to activate your credit card within this time frame to continue using it and reap the benefits.
Keep these things in mind after getting a credit card
Do not spend to redeem rewards
Most of the credit cards offer welcome benefits in the form of bonus reward points, welcome benefits, discounts or cashback with select brands, free flight tickets, etc. However, it comes with certain terms and conditions. Can be availed in the first 30 days or first 3 months, by spending some specific amount etc…
In order not to get overwhelmed by such benefits, it is important to use the card according to your needs at that time. Do not spend only to redeem rewards. This can increase the burden on your pocket.
Check credit card offers while shopping
Credit card companies often offer many offers. So when you are shopping, check the offers of your credit card. Which gives many benefits including cashback, discounts, rewards. Which you can take advantage of. But do not forget to calculate how much interest you will have to pay in advance. Compare both and use the credit card.
Pay on Time
Most new credit card holders pay the minimum amount, and do not pay the entire balance. However, as soon as charges start accruing on the balance, new transactions become ineligible for the interest-free period. Even a minimum balance can quickly turn into a large debt because of the high finance charges.
Failure to pay the minimum dues will attract pending penalties in addition to finance charges. This will directly impact your credit score. Overspending and carrying the balance to the next cycle can often breach your credit limit, portray you as a credit-hungry borrower and damage your credit score.
Avoid withdrawing cash
Cash withdrawals are not eligible for the interest-free period on most credit cards. This means that if you withdraw cash from an ATM using your credit card, finance charges will apply from day one. Every time you withdraw cash, a one-time cash withdrawal charge will also apply, which can range between 2 per cent and 5 per cent of the withdrawn amount. Also, when you use this facility, new transactions will become ineligible for the interest-free period, leading to the debt increasing again.
