It’s hard to resist the temptation of going on a shopping spree with that shiny new credit card in your hand. But credit cards can be quite a double-edged sword. If you know how to use them wisely, they can pay for your expenses quickly, earn you points and help you avoid unnecessary expenses. While credit cards offer convenience, harness the Power of a Personal Loan for larger expenses to avoid high revolving debt and interest charges. But if you don’t use them wisely, that same card can be the source of a lot of pain. In this blog, we will share some tips that will help you use your credit card wisely to keep your finances healthy.

Tips to Use Your Credit Card Smartly

1. Ask for a High Credit Limit

Each person’s credit limit is unique. When applying for a new credit card, request the maximum available credit limit. A high credit limit not only allows you to make more credit transactions, but it also enhances your credit score. This is due to the fact that little use on a high spending limit signals a lack of credit-hungriness on your part, which helps your credit history.

2. Keep Your Credit Utilization Ratio Low 

Using a credit card wisely comes with numerous benefits, and one way to use it responsibly is to keep your credit utilization ratio low. When using your credit card, understand Advance authorization to avoid temporary holds impacting your available credit. A credit utilization ratio is the amount of available credit you have used compared to the total amount available. Keeping this number low will demonstrate that you are a responsible borrower, as lenders like to see that you aren’t relying too heavily on your available lines of credit. 

Ideally, your credit utilization ratio should be no more than 30%. This means if you have 100,000 INR in available credit, you should be using no more than 30,000 INR at any given time. If necessary, consider asking for an increase in your existing line of credits so that it becomes easier for you to maintain a healthy balance and not exceed the 30% threshold.

3. Avoid Withdrawing Money Using Credit Card at an ATM

Using your credit card responsibly is key to getting the most out of it. One of the best ways to use your credit card smartly is to avoid withdrawing money from an ATM with it. Withdrawing cash from an ATM with your credit card can be a costly mistake, as many banks charge a fee for this kind of transaction and increase your interest rate. Plus, when you withdraw money using a credit card, it counts as a cash advance, which usually has higher interest rates than regular purchases. 

Another important thing to keep in mind is that withdrawing money using your credit card at an ATM will not earn you any rewards or benefits like other purchases would do. Cash advances also don’t get added towards meeting minimum spending requirements needed on cards to qualify for bonus points either.

4. Don’t Settle for Minimum Payment

When it comes to using a credit card, many consumers are tempted to just settle for the minimum payment each month. But this is one of the worst things you can do with your credit card, as it won’t help you build or maintain good credit and can even harm your financial standing. 

It’s important to remember that when you use a credit card, there are several ways in which you can be smart and make the most out of it. First, try to avoid keeping a balance on your account by paying off your full monthly statement balance. This way, you’ll avoid interest charges and will also benefit from any rewards programs available through your provider. Additionally, if possible, always try to pay more than the minimum payment required; this way, you’ll manage debt better and will also have lower monthly payments going forward.

5. Take Time to Understand Rewards 

It’s important to understand the rewards associated with your credit card before you decide how to use it. Knowing the ins and outs of your card is essential if you want to make smart decisions when it comes to spending with your credit card. 

For starters, you must take time to go over the rewards associated with your credit card. Many cards offer cash back or points for every purchase that you make. Use an Online EMI Calculator to plan your credit card purchases wisely, ensuring affordable monthly payments that stay within your budget.

These rewards can be used towards future purchases or even travel expenses, making them a great incentive for using your card responsibly. Additionally, some cards will also offer additional perks, such as extended warranty protection on items purchased using the card or discounts at certain merchants when you use their services.

6. Use Your Credit Card for Big-Ticket Items Only 

One important tip for smart credit card use is to limit its usage only for big-ticket items such as furniture, appliances and electronics. This prevents you from overspending and helps you build up points or rewards that can be used towards future purchases.

Furthermore, if you do choose to make larger purchases with your credit card, be sure that you can afford them first. Make sure that the item fits within your budget and that you have enough money in the bank to pay off your purchase right away or over time, depending on what works best for you financially. We recommend you to use UPI and a debit card linked to your savings account to make small purchases like groceries and gas.