The main advantage of having a credit card is that you can spread across the cost of a purchase if you are unable to pay for it at once. If this is the reason you are getting a credit card for then you must shop around and choose the right credit card. The credit card providers will be willing to offer you a credit card in no time. You must take your time, shop around and compare before choosing a card. Check the interest that is going to be charged, other benefits offered and other applicable charges before you decide on a credit card.
After you have gotten a credit card, you must use it wisely and try and save money while using the credit card. You must avoid using credit cards for things that are easily affordable and for things that you don’t really need. You will end up in a bigger debt than you can handle if you use the card and not clearing the balance each month.
How can you save money while using your credit card?
You can save money while using a credit card in the following ways:
- Rewards cards: If you wish to save money using credit card, you must use reward cards and cards that offer cashback, air miles, etc. This way on every purchase made using the card, you earn air miles, or a certain reward point which can be redeemed on a later date.
- Interest free credit: Credit card lets you enjoy interest free credit for a month. So, you must always clear out the total balance at the end of each month. This way you won’t be charged any interest. If you can’t clear out the balance, consider turning that amount to an EMI and clear out the balance at the earliest. Not all credit card providers offer this to the customer. So, you need to check before you take a card. You must also keep in mind that when you are converting the amount to an EMI, your credit card limit will be restricted to that amount and you can’t use the card to make other purchases. Turning to an EMI helps you save a lot of interest.
- Consolidate the debt: If you have many credit cards, you might want to consider consolidating the credit cards. As you will be paying annual fees and interest on different cards. If you consolidate the credit card debt, you will only have to worry about servicing one card and this way you will end up saving on the interest charged and on the annual fees applicable on different cards.
- Pay more than the minimum amount: When you are repaying ensure that you are paying more than the minimum amount each month if you are not able to pay the entire balance at the end of the month. This way you can save on the interest on the long term.
- Take credit cards with low interest rate: You can carry two credit cards, one to make purchases that you can repay at the end of the month and the other that is charging a lower interest rate so you can make big purchases and turn it into an EMI.
What should you completely avoid to save money while using your credit card?
You must avoid the following if you intend to save money while you are using a credit card:
- Don’t collect too many rewards cards: Just so you can earn discounts on air tickets or retail stores doesn’t mean you have to collect rewards cards. Though it may seem like a good idea, you are ignoring the interest and the annual fee that is charged on every card. Having too many cards will also lead to the risk of overuse and you may end up acquiring things that you don’t require.
- Don’t reply on credit card for meeting emergency requirements: If you are relying on your credit card to cover for an emergency, remember that is expensive on a long run. Dig into your savings if need or borrow from a friend. Credit card balance is not what you have but what the credit card provider is lending you.
- Avoid using cards for cash advances: Even if you think you are taking a small amount as a cash advance, the expense involved is expensive. Avoid taking cash advances with your credit cards.
If you want to make a purchase with your credit card but you also know you won’t be in a position to repay it at the end of the month, wait until you get your statement to purchase the product, this way you will have enough time to repay that amount. Use your credit card wisely and responsibly.