Learn: How To Use Credit Cards Effectively?

how to use credit cards

Come on! Using Credit Cards is just a piece of the cake? What’s there in it?

Ever heard about How Bad Credit Cards Are? Whenever I talk about Credit Cards being bad, we all have the following in our minds:

  • High Interest Rates of 35% to 45% per annum
  • Plastic Money
  • It can lead to more spendings
  • Can lead to bank ruptcy

Yes, all of them are true but only when you don’t pay your credit card bills every month in full.

I used a rather different title for this post but actually, it should be somewhat like this…

How To Manage Your Credit Cards?

It is one of the hectic things to do for people with a bad mindset while very easy for people with a good mindset. The most important thing you need to learn about Credit Cards is that,

It is not your money!

via GIPHY

Period.

Many of you keep a mindset that you have that money, but it is not totally true. Yes, you have been assigned a credit limit of that particular amount which you can spend but it’s not your money.

It is the bank’s money. They are lending you that amount to spend and you need to pay them back on time.

Now once you fully understand this, managing a credit card is super easy.

Therefore, while using credit cards you need to keep in mind the following things below:

  • Spend only the amount which you can repay in full
  • Higher limits doesn’t mean you have to use it all, it can also lower your CIBIL Score
  • Avoid using Credit Cards for commercial use as they are for personal use, it can lead to blockage of your credit card.
  • Use credit card for the amount you usually use every month
  • Plastic Money don’t give you same feeling as spending hard cash, so beware.

If you remember all these while using your credit card then you’re good to go.

Why Credit Cards Can Be Good?

Everyone has their monthly expenses and they spend money for their essential needs. Credit cards give you freedom of 30-45 days of the interest-free period.

For example, my OneCard Credit Card has a billing cycle of the 1st of every month. My bill is generated on the 1st of every month and my due date falls on the 18th of every month.

Basically, I am getting 30 Days + 18 Days Extra and that’s 48 days of interest free payment.

Within these 48 days whatever my monthly expenses amounts are, I chose to invest that amount elsewhere and generate roughly 2-3% returns.

This is one of the benefits of owning a credit card.


Secondly, getting a credit card and paying them on time with build your credit history and it is very important to have whether you take the loan in future or not. The credit history and score is necessary and it can help you at times of emergency or whatever the bad financial situation becomes.

Therefore, spending even the minimum amount on credit cards and paying them on time will fetch you amazing credit history and score.


Coming to the third important point, credit cards actually pay you when you spend. Yes, it’s true. Each credit card comes with its own benefits and reward points which you can get just by spending while if you spend the same amount with your debit cards, you get nothing.

It might not look much in short term, but these rewards points will help you save a lot of money in the long run just for spending amount for your regular needs.

Who actually pays you for spending? Well, credit cards do. You can check out these credit cards.

I am not just telling you out of nowhere, yes I have been there and saved plenty of money using credit cards. My main primary cards are, OneCard & ICICI Amazon Pay Credit Card.

I save roughly 1000 to 1500 per month in cash back and offers.


Credit Cards are easily usable everywhere around the world. The markup fee is pretty low and you have good limits and you can swipe it anywhere you want while travelling. It will also make your trip comfortable and you might not have to do all the hassles of converting currencies roaming here and there at the airports.


Conclusion

Hope you got something to learn today. Yes, credit cards are both bad and good but it depends on how you manage them. The better you manage the credit card the more benefit able it is in the long run. You just need 21 days to change your habit and mindset, and if you change it then credit cards can be a good financial instrument for you.

If you like the post, then do share with your friends and family and let them know about credit cards too.

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Emad is the founder of this blog and is the sole writer & editor on this blog. He has been learning about finance and the stock market for the past 2 years and sharing his experience on his blog and explain complicated topics in simple layman terms.