1. Always Pay Your Full Balance on Time

This is the golden rule of credit card usage. Paying your full balance before the due date helps you avoid interest charges, which can be surprisingly high (often between 24-55% annually).

For example, if you have a ₹50,000 balance with an interest rate of 36% annually and only make minimum payments, you could end up paying more than ₹30,000 in interest alone over time. Once Shubham, forgot to pay his bill in just two days and was shocked to see the interest charge on my next statement, lesson learned!

Set up auto-pay if possible, or at least calendar reminders a few days before your due date to ensure you never miss a payment. Another way to remember the due date is to change the due date for all your credit cards to one specific day, say 1st of every month, this way, you will never fail to miss any payment.

2. Keep Your Credit Utilization Low

Your credit utilization ratio is the percentage of your available credit that you're using significantly impacts your credit score. Try to keep this below 30% for the best effect on your score.

For instance, if your credit limit is ₹1,00,000, aim to keep your monthly spending below ₹30,000. If you regularly need to use more than 30% of your limit, consider requesting a credit limit increase or spreading purchases across multiple cards. This way, your CIBIL score will not get hampered.

3. Be Cautious with Cash Advances

Credit card cash advances might seem convenient, but they're incredibly expensive. They typically come with:

• Higher interest rates than regular purchases
• Interest charged immediately (no grace period)
• Cash advance fees (usually 2-3% of the amount)

4. Read the Fine Print on Rewards Programs

Credit card rewards can be fantastic but only if you understand how they work. Each card has different earning rates, redemption values, and expiration policies.

For example, you have accumulated points for a 3 year period, and are planning to use them for a flight, only to discover that they had expired because you missed the fine print about a 12-month validity period. Now, you don’t need to worry, track all your points on the SaveSage app and not just that, you will get to know what gives you the best redemption value.

5. Watch Out for Hidden Fees

Beyond the obvious annual fees, credit cards can come with various charges that add up quickly: Foreign transaction fees (typically 2-3.5%), Late payment fees, Over-limit fees, Card replacement fees, Inactivity fees and many more.

Last year, Varun used his regular credit card on an international trip and was shocked to see foreign transaction fees totaling almost ₹5,000. If he had known earlier, he could’ve opted for a travel card that doesn’t charge foreign transaction fees.

Review your card's fee structure carefully and choose the right card for different situations to minimize unnecessary costs.

6. Don't Apply for Too Many Cards Too Quickly

Each credit card application typically triggers a hard inquiry on your credit report, which can temporarily lower your score. Multiple applications in a short time frame signal financial risk to lenders.

Suppose, you applied for four credit cards within two months, hoping to maximize different rewards programs. But, your CIBIL score may have dropped by 50 points.

Space out your credit applications, ideally waiting for 6 months between applications and only apply for cards you really need or that offer significant benefits for your spending habits.

7. Report immediately if the Card is lost/misplaced/stolen

If your Credit Card is stolen, misplaced, or lost, contact your bank right away. After confirming your Card Number and other details, they'll block your card immediately. Don't wait to report it, quickly take action to prevent potential misuse by fraudsters who could otherwise exploit your missing card.

Conclusion

Using a credit card responsibly can help build your credit score, earn rewards, and provide financial flexibility when you need it most. The key is being mindful and deliberate about how you use this powerful financial tool. Remember that credit cards aren't free money, they're short-term loans that need to be managed carefully. By following these guidelines, you can avoid the common pitfalls and make your credit card work for you rather than the other way around.

At SaveSage, we’re enabling our users to optimise their credit card rewards and loyalty programs! No jargon or confusing statements; just clear, actionable insights when you need them most!

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