You may not have the necessary funds available in-hand to meet certain small but vital expenses. A credit card can help you in such situations by providing financial support to mitigate such necessary expenses and repay later.
However, many people feel that using such cards results in debt accumulation. This is only true if you do not know the correct method of managing credit card payments.
Listed below are some experts’ tips on how to best use credit cards.
- Divide your credit card bills into EMIs
If repaying your entire credit card debt at once becomes a problem, you can always consider breaking the sum into equal monthly installments for ease of payment. You can ask the financing company issuing your card for the facility. However, doing so will cause the NBFC to charge interest on the monthly payments, along with a one-time processing fee.
- Focus on paying off debts with a higher interest rate
Different credit cards charge varying interest on debts. If you use multiple cards, you must keep in mind which has the highest interest rate attached to it. Start dealing with the bills from this card to minimize your financial liabilities. If the bills from these cards remain unpaid, they tend to accumulate a considerable amount of interest, which becomes difficult to manage.
- Take advantage of debt consolidation
Avail a personal loan to manage your credit card payments. Such a procedure is beneficial if you have multiple cards and debts related to each of them. Rather than keeping a track of the billing cycle for each card, you can borrow some funds from a financing company and clear all your debts at once. After doing so, you just have to repay the sum you borrowed to clear the debts. This process is known as debt consolidation.
- Opt for automatic payment of bills
It is difficult to maintain track of the due dates for the bills of every card. If you forget the due date, the card company charges a hefty late payment fee, leading to an increase in your financial liabilities. An automatic payment system prevents such cases and saves you money. Furthermore, with such a system in place, you do not have to remember the bill payment date for all your cards.
- Never withdraw cash from an ATM with your card
If you require cash, stick to your debit cards. Swiping credit cards on an ATM to withdraw cash results in high interest charged on the sum withdrawn. The best way to use a credit card offline is to swipe it directly at the point-of-sale or POS. However, some cards provide users with a grace period of up to 50 days on ATM withdrawals, during which no interest is charged on the funds withdrawn. For instance, this feature is one of the many advantages of the Bajaj Finserv Credit Card.
- Transfer balance to reduce liability
If you operate multiple credit cards and have bills to pay on each, you can take advantage of the balance transfer option. The transfer features essentially allow you to gather debts from the different cards to a single card, which makes managing the payments simpler and more convenient. Furthermore, after balance transfer, you receive a 90-day credit-free period during which time you can arrange for funds to repay your outstanding debts.
Lastly, you should avoid using more than one card. While the thought of using different cards to take advantage of various features may sound attractive, doing so will only increase your financial liability.
Lastly, make sure to always meet your maximum outstanding amount on each statement and not just the minimum amount. If you pay the minimum, the remaining amount will simply be transferred onto the next statement along with interest incurred and increase the total debt.