Rules To Use Credit Card Effectively
Just follow these set of rules:
Pay Total Amount Due
Your bill may show a minimum amount due (which is typically 5% of the total amount) and a total outstanding amount. To avoid interest on the balance amount, always pay the full bill amount before the due date. If you pay partially and choose to roll over the dues to the next month, interest will be levied and it will only increase the unpaid balance. This cycle drags on till you realise that it's better to make a bigger or rather the full payment to avoid interest and close the transaction.
Pay Dues Before Due Date
Banks grant an interest-free period from the date of the transaction to the due date. It's typically 45-60 days during which you can pay the total outstanding amount without attracting any interest. Pay your dues off every month during this period to also improve your credit score.
Convert outstanding amount into EMI
Banks offer the option to convert the total outstanding amount into EMI. This works like any loan and you've to pay a certain principal amount + interest every month till your balance clears up. This option is suitable for those who are unable to tackle their credit card debt effectively & can't keep track of their expenses. Another benefit is that the EMI interest rate is around 2% per month which is far lower than the credit card interest rate of 3% to 4% per month.
Make the most out of rewards
Credit cards offer an array of cashback, offers and reward points to attract more customers. Make use of the privileges like free lounge access & movie tickets without going overboard with your spending. Pocket some savings by making use of offered discounts on various purchases.
Boost your credit score
A good credit score works towards fast loan approvals and lowers interest rates. Timely bill payments and using the card only when necessary can boost your score. CIBIL also considers the credit card utilization ratio, so make sure you make credit card purchases prudently.
Spend within the limit
Rewards may be tempting but it's wise to spend within your credit card limit. This is because crossing it may attract a penalty and increase your debt. Stay alert about your spending and avoid utilizing the entire credit card limit in one go.
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