Wise Use of Your Credit Card
Urban Indians have started using their credit cards and debit cards a lot more than usual after the cash crunch caused due to demonetisation. Debit cards cannot be used if you do not have sufficient balance in your account.
Credit cards will give you the loan temporarily but you will have to repay it. Often, credit card repayment is associated with hefty interest rates. Thus, it is extremely important for all the credit card users to learn the safe ways of using credit cards so that they do not end up with a massive bill at the end of the billing cycle. Overspending on credit cards can also lead to a drop in the credit rating which also brings down a person's credit worthiness.
Use your Credit Card Wisely when you do not have Cash
According to one of the senior officers of HDFC Bank, there has been an increase in debit card transactions by 4 times after demonetisation. As per Axis Bank, the usage of debit cards has spiked by 100%. The transaction volume for credit card has gone up to 30% in this short span, according to Vijay Jasuja, CEO of SBI cards.
MD of JLL retail services, Pankaj Renjhen, feels that demonetisation is going to influence several shoppers to make use of plastic money in the long run. He added that the usage of e-wallets, debit cards and credit cards goes up in malls when the big sales arrive. This happens mostly when fintechs (financial technology companies) and banks offer discounts and cashbacks.
As per several financial experts, the abrupt and uncontrolled rise in credit card usage can invite trouble. As per the MD of Experian Credit Bureau, Mohan Jayaraman, a person must ensure that payment towards credit card dues must be made every month. At times, credit card users fall into debt traps by only paying the minimum due amount over the outstanding balance on the credit card. Eventually, this leads to huge credit outstanding for the credit card holders.
Monitor Credit Card Expenses
It is highly advisable that all expenses on the credit card are monitored. Jayaraman added that if the spends or utilisation rate goes out of control, then it can have a negative effect on the credit score.
Certain things that you must do with respect to your credit card usage are as follows:
- Set a budget for your credit card and ensure that you stick to it. Keeping a budget in mind but overspending at the time of cash a crunch will not help you at all. Monitor your expenses by writing them down on paper. In case you cannot do that, make use of the mobile applications that help you to track and manage your expenses.
- Do not apply for multiple credit cards just because you can get some discount or offer. Several malls and supermarkets have various activation points close to the billing or transaction counter. This is where the credit card companies give away more cards if you shop for a particular amount. You must control your spending habits in order to lead a life free of financial stress. For example, if you have a limit of Rs.30,000 and if you have completely exhausted it, control your temptations of shopping more. Do not call up the credit card issuer to increase your limit. If you do so, it can be a burden to pay off the debt.
- Stick to one credit card only to tide over the problems created due to the cash crunch.
Bottom Line - Credit cards can be of great help if you use them wisely. Do not spend what you cannot repay. Ensure that you make the payments towards your credit card outstanding balance on a regular basis until the debt is cleared.
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