credit card management

5 steps for effective credit card management

Finance

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There are many advantages to managing your credit card effectively. You can increase your creditworthiness, benefit from rewards offered by the bank, and meet your short-term financial obligations on time. Not doing so, however, can lead to several problems, such as debt traps. You can follow five simple steps to effectively manage your credit card in 2024.

Five steps for effective credit card management

You can follow these steps to effectively manage your credit card –

  • You must pay your credit card dues on time:If you miss a credit card payment, you might have to bear a late payment fee. Furthermore, the bank might decide to increase the interest rate and your credit score might fall down. Most online credit cards help customers automate their credit card payments through a mobile banking app. You can choose this option to pay your bills on time without fail.
  • Check your credit card statements regularly:Checking your credit card statements has several advantages. Firstly, you can easily detect any unauthorised or suspicious transactions, and report them to the bank immediately. You can also identify any discrepancies such as changes in interest rate by checking these statements regularly.
  • Stick to a budget and spend accordingly:If you prepare a budget and accordingly spend using your credit card, your impulsive expenses will reduce. This will help you use your card more effectively.
  • Try paying more than the minimum amount every month:Remember that you accrue interest every time you pay only the minimum amount. Strive to pay more than the minimum amount to avoid an accumulation of interest and prolonged debt repayment.
  • Develop healthy spending habits:Whenever you feel like spending using your credit card, you must check if the merchant can offer a credit card-related reward/cashback on your purchase. You can also restrict your shopping to merchants who have tied up with your bank to offer rewards through the credit card. You must also avoid impulsive expenses using your card.

Points to consider while using an online credit card:

Here are three key points you must keep in mind while using an online credit card –

  • Maintain a low credit utilisation ratio:The percentage of credit limit that you are using must be below 30% ideally.
  • If you are burdened with debt, you should consolidate it in a single account:Consider debt consolidation by shifting your debt to one credit card with a lower rate of interest.
  • Do not leave your card unused for a long time:Not using a credit card is not a good way to avoid or reduce credit card debt. Your creditworthiness will be affected if you do not use at least a portion of your overall credit limit. A low credit score will affect your ability to avail loans in the future.

In conclusion, to effectively manage your credit card, you must pay your dues on time, check your credit card statements regularly, and budget before you spend. You must also develop healthy spending habits and pay more than the minimum amount due every month.

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