Credit Cards tips you can use !

Who does not have a Credit Card? Everyone does…..but those who use them properly for their advantage is minimum!!There are some factors that are vital in ensuring that the credit card is used in the right way. This requires maintaining some discipline. Keeping many of these points in mind while using and even selecting a particular credit card will greatly benefit a cardholder.

Here I will provide you with 7 Easy and Practical Credit Card Tips, which you can use to your advantage:

Number of cards

There are a large number of credit card offerings in the market today. Many of these do not involve any cost for cardholder, so they are not affected financially when they select a new card. There is a need to curb the number of cards that a person holds because it will make the usage difficult. There is also the dilution of the benefits that come with the usage of multiple credit cards because reward points will get spread out. This will also mean that remembering the due dates and paying off the amounts on the credit card regularly and even monitoring them will become a very difficult task for the individual to handle. This requires a decision from cardholders about the number of credit cards that they will restrict their holdings to so that there are no administrative problems for them going forward.

Overall limit

Each credit card has different features related to its usage. This involves details relating to the credit limit on each card along with the cash limit. While the figure for an individual card might seem to be manageable there is also a need to look at the position on an overall basis. All the credit cards taken together can result in the credit limit increasing to a figure that is beyond the paying capacity of the individual. If the amounts are used to the maximum then there can be a problem in paying back the amounts and this can be avoided by ensuring that there is a credit limit that can be managed in terms of repayment.

Keeping a buffer

In many cases people want to ensure that they have an element of safety when it comes to their credit cards. They would like to keep a limit that is more than what they would normally use so that in case of any emergency it will help them tide over the crisis. This is a good point, and it also means that a person does not have to use the limit present on the cards just because there is a limit present. This buffer can prove to be extremely useful in various situations and is also essential in various cases.

Card composition

Many people do not restrict their holdings to a single credit card. They get more than one card but the selection decision here has to be based on the type of usage of the card. Looking at the kinds of benefits offered in terms of reward points as well as the discounts and other benefits, it can go a long way in determining the kind of benefits that a person can take with respect to the selection of a credit card. Doing this wisely is a good way of ensuring that the credit cards remain manageable for the person.

Balance transfer

This is a facility being offered by many banks. This enables you to transfer your high interest balance on one credit card to another with a lower rate of interest. This is a viable solution to escape the debt trap, provided one is able to pay off the entire amount within the said period.

Freebies

Many credit cards now offer cashback on your transactions, and almost all cards offer reward points. If you are someone who shops a lot using a credit card, look for a card which maximises these returns. Many cards even offer free insurance cover as an added benefit.

Billing cycle

Credit card companies prepare their statements on a monthly basis. They are also supposed to give the cardholder around 15 days to make the payment. Therefore, if you plan your shopping just after the previous statement date, you can actually enjoy around 30 + 15 = 45 days of credit.

Here’s how a typical balance transfer works:

Say you have an outstanding balance of AED 30,000 on your card on which you are being charged an interest of 36% p.a. If you pay an amount of AED 1,000 every month, it will take you 79 months to pay off this balance and you will have paid AED 48,240 in interest charges. Now, some other bank approaches you with a balance transfer offer.

You agree to transfer the whole amount to the new card for which you will be charged interest at the rate of 9% p.a. for the first 6 months and 18% p.a. subsequently till the balance is paid off. If you avail this offer, you can pay off the balance in just 39 months and you will have paid interest charges of only AED 8,028. So in effect, you end up saving AED 40,212 (which is higher than your original balance) by transferring your balance.

While choosing your credit card keep the following points in mind:

Usage: Analyse what you will be using your card most for. For instance, if you are a frequent flier, opt for an airline co-branded card to maximise your reward points. Likewise you can explore other co-branded cards for retail, mobile, petroleum and other benefits.

Credit limit: You will get a higher credit limit on premium cards. However, if you feel that you may have a problem with overspending, it is sensible to opt for a lower grade card even if you are eligible for a premium one. The lower credit limit will automatically help you keep your bills low.

Repayment: If you are planning to repay your monthly bill in full every time, choose a card which has the lowest joining and annual fees. However, if you will be using the revolving credit facility a lot, it is better to opt for a card with a low interest rate even if its annual fees are on the higher side.

Add-ons: If you want a card purely for the convenience it offers, a plain silver card should adequately fulfil your criteria. However, if you want something extra in terms of status accorded or freebies offered you may want to opt for a premium card.

Auto-debit facility: Many cards now offer an auto-debit facility. It means that if you have an account with the same bank, you can give them standing instructions to pay your credit card bills directly through your account. Usually, you can pay either the balance outstanding or the minimum amount due.

Cash back benefit: Owing to cut-throat competition, many banks are now offering cards with cash back benefits. This means that the bank actually deducts an amount from the transaction value before billing you. This amount is usually in the range of 1% to 2% and is applicable only on transactions above a specific value. Some banks are also offering a flat amount discount (between AED 250 to AED 500) on the first transaction made with the card.

Following these guidelines will not only make you a better user, it will also increase your chances of saving money.

Do you have any Credit Card tricks? Let me know through the comments below.