In today’s world, having a credit card is important for many people. This is because credit cards are very convenient.
If you don’t have cash in your pocket but need to buy something, you can use your credit card to make the purchase.
You can then pay back the amount without any extra cost during a certain period called the grace period.
But if you can’t pay your credit card bill on time, it can cause problems for you.
In such a situation, you’ll have to pay a significant amount of interest on the owed money.
Many times, people get caught in this debt trap. Not paying bills also damages your credit score.
If you use a credit card, make sure to understand a few things. If you use it wisely, you won’t get trapped in debt, and your credit score won’t be affected.
1. Do not take credit card due to offers or discounts
Before you get a credit card, think about how much you really need it.
Don’t buy one just because others say it’s good or because of special offers and discounts.
Always remember that using a credit card means borrowing money. If you can’t pay back the borrowed money on time, it will make things harder for you.
2. Avoid having more than one credit card
If you already have a credit card and it’s working fine for you, getting another one might make things harder.
Having multiple credit cards can sometimes lead to spending on things you don’t really need.
It becomes tough to pay back the money spent on time when you have more than one credit card. In this case, there’s a chance of getting into debt.
Additionally, having a credit card comes with various extra costs. If you have more than one card, you’ll have to pay additional, unnecessary expenses.
3. Do not spend more than 30 percent
Every credit card has a spending limit, which can be thousands or lakhs. It’s important not to spend more than this limit.
Many experts suggest spending only 30 percent of your credit card limit. If you spend more than that, it affects something called your credit utilization ratio.
The more you use your credit card, the higher something called CUR becomes.
This shows that you rely a lot on credit cards. In this situation, your credit score can be affected.
To maintain a good credit score, it’s suggested that your credit utilization ratio should stay below 30 percent.
4. Sudden card closure
Sometimes, when people have two cards, they might close one all of a sudden.
It’s not a good idea. Closing one card can make your credit utilization ratio higher.
Earlier, your spending was divided between two cards, but if you close one, it will all be on one card.
A high credit utilization ratio can harm your credit score. So, even if you don’t use the card much, it’s better to keep it active.
5. Never make the mistake of withdrawing cash
In tough times, you might think of taking cash from your credit card. The amount you can take depends on your card’s limit.
But it’s better to avoid withdrawing cash from a credit card because it comes with a high charge. Also, there’s no benefit of an interest-free period for cash advances.
