Moneycontrol
Aug 18, 2017 12:53 PM IST | Source: Moneycontrol.com

5 ways to optimise credit card usage and plan your finances

Making purchases through credit cards can help you manage your finances and if you pay up in time there is no extra cost involved.

5 ways to optimise credit card usage and plan your finances

Navneet Dubey

Moneycontrol News

Do you have a credit card? If yes, then it’s important to know how you can make the best use of it while purchasing goods. Credit cards are simply a loan granted to you with a predetermined range of amount through which you can purchase anything over and above your salary limit.

One should generally avoid taking a loan unless it’s a necessity. However, making a purchase through credit cards can help you in managing your finance and if you pay up in time there is no extra cost involved. Payments through credit card allow you to repay the amount within 45-50 days which means you get an extra 15-20 days to clear off your bills without even paying interest. Moreover, even if you think you may not be able to pay the money in two consecutive months, you can opt for EMI options where you may make the repayments over a period of a few months.

Here are some ways in which credit cards help you in managing your finances efficiently and optimise card usage:

Make your expenses budget

Most of us fail to calculate our monthly expenses. Buying through swiping your credit card will help you keep track of every expense you make. Doing so, you can easily analyse a set pattern of expenses you make through your monthly bill. This process will also help you in maintaining your monthly budget and reduce the habit of overspending.

Convert payments into EMI’s

Credit card issuing banks allow customers to convert their outstanding amount into monthly EMIs. This can be done to spread out the repayment and thereby reducing your monthly burden. Mostly, the ratio between the interest on EMI’s against late payment interest charges lies around 1:3 on monthly basis that is if you convert a certain amount for 12 months EMI you would have to pay around 12% interest rate else it may go up to 36% or even more if the amount is not paid on time and not converted into EMI’s. You should pay either the full amount or convert it into EMI's to reduce your monthly bill amount else, you run the risk of falling into a debt trap.

Avail reward points & cash back offers

On every purchase, you get reward points depending on the card type which you opted. Not only this, during some periodic sales, you may also get 10-15% discount or cash back offer after few months when buying products through credit card. At times when you want to make some savings in a month without losing on your discretionary expenses, you can easily set off your rewards points against buying movie tickets, going at dining places, or doing an online purchase and so on. However, make sure that on regular basis you are not overspending from your credit card for the sake of earning rewards points every month.

Acquire an auto debit facility

It is difficult to remember too many dates to pay any number of bills in a month. Instead opt for an automatic payment facility through your credit card, which will be a better option for you, where all your bills will get self-executed and you only need to pay one-time credit card bill through your any bank account. Make sure you keep sufficient amount in your bank to clear your credit card bill in time that is before the due date.

Opt for a lower limit credit card

A general rule says that you shouldn't increase the credit limit to a point that you may find unmanageable given your salary. This will help you remain in your pocket and save you from becoming spendthrift. As increased credit limit can urge you to spend more and such over spending may take you into a severe debt trap. Therefore, you should avoid such catchy and tempting offers made by banks which can compel you to increase your credit limit.
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