How to Use your Credit Card Wisely: 7 Smart tips

Most people prefer carrying at least one credit card nowadays because of the various benefits it has to offer. In fact, there are about 2.8 billion credit cards in use across the world.

Despite that, many people miss out on making the most out of their cards. Here are some ways to use your credit card wisely and reap the maximum benefits it has to offer:

How to Use Your Credit Card Wisely: 7 Smart tips

1. Keep your credit utilization ratio low

Carrying a high balance on your credit card can damage your credit score. If you have multiple credit cards, try to keep the credit utilization ratio below 50% of the total limit in order to maintain a strong credit score.

If your high balances are carried over to the next month, you will also witness an increase in your interest. If this goes on for a long period of time, not only will your score take a substantial hit but you will also have to pay a lot of extra interest. It is best to limit your utilization ratio below 50% of the credit limit.

2. Make bill payments on time

One of the biggest mistakes you can make when owning a credit card is not paying the bills on time. If you don’t pay on time, the interest rate on your outstanding balance will pile up and it will become difficult for you to manage the bills.

Moreover, your credit score will take a big hit if you repeatedly miss the due dates for bill payments. Even if you are in a situation where you can’t afford to pay the entire bill, make sure to pay at least the minimum amount due each month.
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3. Avoid withdrawing money using your credit card at an ATM

Credit cards provide you with the facility to withdraw hard cash from an ATM but you must try to avoid using this feature as much as you can.

Withdrawing money using a credit card attracts heavy charges immediately without any grace period. It will not be feasible for you to pay the high amount most of the time so it is best to avoid using the card at ATMs.

4. Pay off high-interest credit cards first

If you are someone who has multiple credit cards, make it a point to pay off the bills for one with the highest interest rate.

If you are in credit card debt for quite some time, your focus should be on paying off the one which has a higher interest rate as compared to the others. Because if you don’t, the interest will keep piling up and in no time, you will be presented with a huge bill in front of you.
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5. Keep an eye on Renewal Fees

Most credit cards have a joining fee when you get the card. Several also have a renewing fee. You must make sure that you carefully go through the fees structure of the credit card you have in order to avoid getting overcharged.

If you observe that the renewal fees are higher as compared to some other companies, you can avoid renewing the card and go for one that offers sufficient benefits with a nominal fee.

6. Don’t Use the card for every purchase

Making payments with credit cards is extremely easy and saves a lot of time. That is why it can become so addictive and you might have the urge to bring out your card to pay for every single purchase that you make.

However, remember that small purchases do add up over time. If you use the card too frequently, you will accumulate a lot of debt and will have to pay a huge bill at the end of the billing cycle because of the interest rates.

Try to keep your card limited to big purchases in order to avoid raking up huge bills.
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7. Make the most of your rewards

Most credit card companies offer to join benefits or reward programs for their cardholders. They can be in the form of some gift vouchers, discounts on particular brands, or access to airport lounges. Make sure that you properly go through the rewards that you have access to and redeem them.

Redeeming all the benefits that your card has to offer is the best way to make the most out of your credit card. Generally, the more the interest rate, the more benefits you tend to get.

Using these tips when you get a credit card will allow you to reap all the benefits your card has to offer.