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7 Smart tips for using a credit card without getting into a debt trap

Almost every other day in our life, we come across phrases like credit cards are an invitation to debt traps, they promote overspending, they are harmful to financial health etc. But these are nothing but examples of biased opinions or hearsays. Instead of believing such hearsays, biased opinions and misstatements, you should own a credit card yourself and take the right steps and develop habits that make this financial tool a boon to your financial health in multiple ways.

Explained here are some smart steps you can take to ensure you maximize the benefits of the best credit card in India without getting into any sort of financial trouble:

Pay your credit card bill timely as well as fully

The first and foremost step that holds the key to maximizing the benefits of SBI credit cards is to always repay the credit card bill in full and on time. Following disciplined behaviour for repayment of a bill not only helps in preventing the levy of hefty finance charges but also contributes to building a good credit score. And even in financially weak circumstances or in case you overspent and aren’t able to repay the full dues timely, try to at least repay the minimum dues, otherwise late payment fees and finance charges both will be levied, apart from damaging credit score too. But remember to never get habituated to repeatedly repaying just the minimum dues of usually 5% of the bill amount. Getting comfortable with it would surely burn a hole in your pocket and land you into a debt trap. So ensure to repay the pending dues, if any, as soon as possible when using the best credit card in India

Control the impulsive urge to grab enticing discounts and offers

One of the key secrets to the success of smart SBI credit card users is remaining disciplined and controlling the impulsive urge to grab discounts and offers just because they are available. Spending more than what you can actually repay would, in all likelihood, land you into debt traps or harm your savings and investments meant for other life goals. Only use your credit card, even if offers are available when you really need that purchase, and the offer is good enough to grab, instead of just taking it for the sake of availability. But even when doing so, ensure you would be able to timely pay the credit card bill without any hiccups.

Don’t keep piling up credit card EMIs

If you are amongst those excited consumers who keep on buying something or the other just because it is available on EMIs, then stop that. Yes, credit card EMIs available from the best credit card in India can be helpful to purchase something you can’t buy in a lump sum, but remember that credit card EMIs are compulsory to be repaid every month during the tenure of EMI and are not part of the minimum dues of 5%. Simply put, for example, you have made the purchase of Rs 10,000 in a month on your SBI credit card, and your credit card EMIs currently are separately Rs 5,000 a month. So, in that month, your minimum due wont be (Rs 10,000+5,000=15,000 x 5%, i.e.Rs 750). It would instead be Rs 5,000 (EMI) plus 5% of Rs 10,000, that is Rs 5,500. Also, you would have to pay the applicable GST as well on the EMI included in the bill. So, always ensure to factor in all this when taking anything impulsively on EMIs.

Take ‘pre-approved loan against credit card whenever required

A not so known but vital feature of credit cards is the loan against them. Just like the nature of personal loans, credit card loans are unsecured and can be used for any purpose. However, credit card loans are pre-approved, implying that credit card issuers tend to offer these loans only to select cardholders having a good credit profile. 

The loan amount for credit card loans from top lenders like SBI credit cards is generally dependent on the available credit limit of the cardholder. But some card issuers have begun offering these loans over and above the credit limit of the user as well, in the form of another variant of this loan. The presence of extremely quick disbursals and repayment tenures of around 6-60 months are the two key features that make credit card loans a handy financial instrument to help you deal with financial shortfalls.

Do not ignore your reward points and their expiry

One of the highlights amongst numerous benefits of the best credit card in India is reward points. The accumulated reward points on credit cards can be redeemed for a wide array of benefits like gift vouchers, conversion into air miles, redemption at merchant outlets, and may even be adjusted against outstanding bills. The redemption program varies amongst lenders and credit card variants.

But what you need to remember, more importantly, is that reward points of most credit cards, including SBI credit cards, have any expiry. They lapse after a period of usually 2-3 years. So, it’s crucial to keep track of your reward points’ validity in order to make the most of available redemption benefits.

Plan transactions as per interest-free period

Interest-free period in credit card refers to the period between the date of transaction and the due date for its repayment as per the credit card bill.  In this duration, no interest is charged on credit card transactions, except if you fail to pay the entire outstanding dues by the due date. Generally ranging around 18 to 55 days, you can maximize this period provided by the best credit card in India by making the transaction in the initial days of the billing cycle, especially the big ones so that you get more time to repay it by the due date. 

 Build a high credit score through credit card usage and repayment

Your credit score is computed by the credit bureaus after taking into consideration the information given by the credit card issuer and other lenders (in the case of loans). And on the basis of your credit score, financial institutions assess your creditworthiness to take credit cards and loans.

So, as your credit card transactions are viewed as equivalent to availing loans, credit bureaus take them into consideration when calculating your credit score. Since credit cards do not levy any compulsory interest charges as long as the full outstanding bill is repaid by the due date, they are one of the most cost-effective ways to build your credit score.

Remember to inculcate healthy habits towards your SBI credit card, like paying your bill timely and in full, keeping your credit card spending within 30% of the total credit limit and refraining from submitting applications with multiple lenders in a short period. All this will help in building a good credit score as well as maintaining or improving it.

Also Read: How To Apply Wall Murals.

 

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