A credit card can be an asset, depending on how you use it. Misusing a credit card will cost you money. It is important to develop correct habits when using a credit card. As a result, you will not leak unwanted cash from your wallet and build a rewarding credit score.

Paying the minimum amount

You have the option to either pay the total bill amount or the minimum due amount. Banks will allow minimum due payments. If you keep on paying the minimum due on a monthly basis, it will increase the amount of debt and scale up the additional charges.

When you pay the minimum due amount, the remaining amount is carried over and interest is charged on the amount. So, try and pay the total credit card monthly bill amount.

A good trick is to open a separate savings account and keep on putting as much as you can in the account. Later, you could use the money saved in this account to pay your credit card’s monthly dues. A good option is the Kotak811 zero balance savings account, where there is no minimum balance requirement. The zero balance account also offers multiple other benefits, such as a free virtual debit card, free digital transactions, options to invest, and the ability to apply for a credit card without a credit score.

Impulsive buying

We frequently make rash purchases without a plan. Such unplanned expenses push you towards debt. In the race to keep up with friends or family, we might be degrading our finances. To feel included may not be the right call every time.

Before making an unplanned purchase, stop for a moment and ask yourself: Are you buying because you need the product or are you buying just to show off? If your current credit card bills are hurting you, then stop using your card again.

Ignoring your credit score

Even if you decide to avoid your credit score, your credit score won’t. A credit score narrates the borrower’s credit track record, and a bad score might not be affecting you right now. But in the long run, your ability to borrow will be adversely impacted.
Paper shopping bag with text online shopping and hand holding mock-up of credit card on laptop keyboard. Consumer can buy product anywhere anytime using internet. Online shopping and ecommerce concept

Being aware of your credit score will ultimately help you. If it is not at par with what is required, you can work on it. Maintaining a good credit score is essential to applying for a future loan or credit card.

Applying for too many credit cards

When you apply for credit, an inquiry appears on your credit report. Too many inquiries over a short period will mark you as a risk in front of the lenders.

Avoid applying for unwanted credit; try and maintain one credit facility at a time. Also, repay your credit card bills on time; this will help you use credit effectively without harming your credit score.

Credit utilization rate
It is never a good idea to max out your credit limit. A high utilization rate might hit your credit score in a negative way. A lower credit utilization rate is always considered better.

You may ask for a raise in your credit limit rather than use your existing limit every month.

Take Away

We hope you will consider the points we discussed here the next time you deal with a credit facility. When it comes to credit cards, good habits like saving money in a zero-balance account, etc. will serve you better in the long run. Click here to know more about credit cards, saving money and zero balance accounts.

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