Credit cards reduce the need to carry cash and empower buyers to make big-ticket purchases. Additionally, attractive reward programs, cashback, and discounts encourage many to apply for multiple credit cards. For instance, in the last year alone more than 10 million credit cards were issued in India.
However, with the convenience comes the responsibility of managing your credit cards properly. If you let your spending get out of hand, it is possible to accumulate unmanageable credit card debt.That being said, with a bit of diligence you can easily ward off this and other challenges when using credit cards. Here are six effective tips to effectively manage and get the most value from your cards.
1. Be Realistic When Applying for Cards
Instead of applying for as many credit cards credit cards as possible, it is important to focus on the optimum use of each. ValueChampion's website provides free guides for a range of spending categories to help you maximise your rewards on those categories that matter most to you. By selectively choosing credit cards, you will avoid the potential pitfall of missing billing cycles and accruing interest expenses. Additionally, if your wallet or purse is full of credit cards, it increases the likelihood that you forget which card to use in each situation. Therefore, it is desirable to have fewer cards able to provide decent financial benefits, rather than having dozens of cards offering very similar rewards.
2. Find The Right Credit Card
So how exactly should you look for credit cards. Should you simply apply for those offering large sign-up bonuses? The short answer is, no. While these promotions are important to consider, you should also take into account other factors when selecting credit cards so that you can manage them easily. First, it is important to consider the rewards type that you value most. For example, while some will prefer to earn cashback, others will prefer to earn rewards in the form of air miles. Additionally, you will want to consider the spending categories that matter most to you. Credit cards are actually quite specialised, with some offering elevated rates for grocery shopping or fuel purchases, for example. Finally some cards are best used by students, those with high incomes, or non-resident Indian's (NRIs) Additionally, individuals must consider the annual charges and associated fees each card requires you to pay. This is important as these may negate your overall financial benefits. Finally, the reward and perks each card offer. If you travel a lot, it might be worth considering a card that allows cardmembers to access airport lounges.
3. Differentiate Cards by Transaction Types
Those with multiple cards may end up using the "wrong" credit cards during transactions. For example, you have a specialized credit card offering big discounts on travel, but you end up using the card meant for big rewards on groceries to purchase your flights and hotels, and therefore get limited benefits. To make sure you use the right card on the right occasion and reap maximum rewards, you can place small stickers onto your cards for easier identification. For example, an orange sticker for the grocery credit cards, a blue sticker for online shopping, a green on the one meant to be used at restaurants, and a red sticker on the fuel card.
4. Manage Card Dates on Spreadsheet or Calendar App
Every card has specific details, including the due date for monthly payment, renewal, annual fees, EMI payment, and expiry of offers. By sticking to these dates, you can earn bonus points, avoid debts, and maintain a healthy credit score. Also, you get a reversal of the annual fee when you spend a certain amount for a period of time, such as over the last 6 months or a year. It is always not easy to remember all these details when you have multiple cards. A better option is to have a spreadsheet listing all these important details for every card you have. Alternatively, there calendar apps that allow you to track important dates, which can easily be used for credit cards. Such apps help in organizing the due dates and send reminders so that you can act before the due date and get the maximum benefits as a credit cardholder.
5. Managing Credit Card Security
Recently, the Reserve Bank of India ordered banks in the country to secure their customer card data following reports suggesting of data leaks. This is a good reminder to cardholders to avoid any security risk while making transactions. To do so, you can make sure that your credit card is EVM chip-enabled instead of having only a magnetic strip. These microprocessor chips offer enhanced protection against phishing, skimming, and cloning by processing data every time you transact. You should change the PIN frequently and also avoid disclosing any personal info or PIN to anyone. Select a PIN that is not easily predictable. Avoid disclosing information with anyone that asks for these details online or over the phone. Finally, only use secure sites for e-commerce transactions.
6. Managing Credit Card Debt
Every credit card has a due date for the payment and the amount becomes a debt when you are not able to pay the bill on time. To avoid incurring debt, you need to pay on or before the due date. If you have any loan on the card, ensure your EMI is taken care of ahead of all other expenditures. You may set up auto-payment modes. Instead of paying the minimum, try to clear as much as possible. Bring all cards under a single account for easier payment options. In case of any salary delay, use one card to pay off the bill on the other. However, make sure the fees don’t exceed the interest rate or late fee that prompts you to pay the balance. Finally, it is important to check your credit statement whenever you get to see if any charges or fees are added to it. In case of any such issue, bring this immediately to the notice of the bank and seek an explanation.
Thoughtful Credit Card Use Leads to Personal Finance Success
Following these tips will help you avoid financial mishaps. Furthermore, by managing your credit cards effectively, you will actually be able to reap valuable benefits. For more information about credit cards in India and tips for choosing a card, visit ValueChampion's website.