A credit card can be a convenient tool if used wisely. Here, we provide you with 5 tips to help you steer clear of credit card pitfalls.
A credit card can serve as a powerful tool for building credit scores, earning rewards, and making convenient purchases. However, if used without understanding, it can lead to debts and financial stress. Don’t worry; saving yourself is possible! Follow our straightforward guide to avoid falling into the credit card trap:
Firstly, let’s understand how a credit card works:
A credit card operates as a flexible loan, allowing you to spend up to a specified limit. You are given a credit limit, and when you make a purchase using it, the deducted amount needs to be repaid within an interest-free period of 20 to 50 days. Upon repayment, that amount is restored to your credit limit.
It’s somewhat like a small loan that you can use repeatedly until you reach the maximum limit. Just remember, don’t spend more than you can repay!
Credit Card Terms
- Interest: Unpaid balances accrue daily interest.
- Credit Limit: Exceeding it may lead to rejected transactions.
- Billing Cycle: Monthly cycle covering all transactions.
- Minimum Payment: Option for partial payment, including EMIs and charges.
- Balance: Outstanding amount awaiting payment.
- Credit Utilisation Ratio: Keep below 30% for a healthy credit score.
- Interest-Free Period: Enjoy 20-50 days without interest on purchases.
5 Tips to Avoid Getting Trapped
- Avoid unnecessary expenses
- Set a realistic credit limit
- Pay your credit card on time every month
- Avoid withdrawing cash from ATMs
- Monitor your credit score
Pro Tip: Treat a credit card as a convenience, not a necessity. Use it thoughtfully.
Bonus Tip: Don’t be afraid to say no! If a salesperson pressures you to make a purchase, politely decline and remind yourself of your budget and financial goals.
Advantages of Using a Credit Card
- Convenient fund access
- Enhances credit history
- Earns rewards on purchases
- Option for EMI conversion
- Welcome bonuses
- Accumulate reward points, cashback, or discounts
- Complimentary airport lounge access
- Insurance coverage
- Concierge service
Remember, using your credit card responsibly is crucial for enjoying its benefits without drowning in debt. Keep an eye on your expenses, make smart choices, and your financial future will thank you!
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi disclaimer
