How to use a credit card smartly? | Advantages and disadvantages of credit cards.

It was in 1949, when Frank McNamara, a well-known New York entrepreneur, was having dinner in a restaurant and when it came to paying the bill after dinner, he remembered that he had forgotten to bring his wallet. He requested the restaurant to take his signature bill and he would come later and pay the bill. Now this thing was not accepted in the restaurant at all and Frank McNamara was forced to call his wife to save him.

He felt a lot of humiliation that day and vowed never to study in such a situation in the future. Interestingly also, from this incident, an idea came to his mind that why not start such a service, in which people can sign and pay money later. This idea later gave birth to The Diner's Club, the first American consumer-facing credit card company. This was started in 1950 by Ralph Schneider.

Now all the companies offer credit cards. Globally, about one billion credit cards are used in new towns. Out of which records of two million are being used in India. Most of you who are read this article have a credit card or you want to take a credit card and so today we will understand what is a credit card and how to use it smartly.

What is a credit card?

A credit card is a plastic card, which users can use very easy to make payments. Through this, users can buy different goods and services and pay them before a letter of time i.e. due date. Whatever transaction you have done through a credit card, you have to make the actual payment to your credit card company or bank. 

One important thing is that every credit card has a user limit. That is, you can do transactions up to a specific amount. When you buy something, it gets reduced from your credit limit and as soon as you make a credit card payment, that amount again goes to your credit limit.

Suppose, you have a credit card with a limit of ₹ 2 lakhs. Now you buy a refrigerator for ₹50,000 and spend ₹10,000 on something else. This means the total of ₹60,000 transactions then after these two transactions your credit limit will be ₹ 1,40,000. Credit cards are billed once a month, which is called a billing cycle. When your monthly billing cycle is completed and your credit card statement is generated, your due amount will be ₹60,000, and as you pay ₹60,000. 

Your one limit will again become ₹ 2 lakh. Once the bill is generated, you have to pay the outstanding amount within the due date. The billing cycle of due date generation is between 20-25 days, so if you have a credit card then, you need to use it very wisely as it can also make your life easier and you can get in trouble if you make a small mistake. 

How to use a credit card smartly?

Here we are going to tell you some tips and tricks to using credit cards smartly. First of all, you should always pay your credit card bills on time. This not only saves you huge interest but also increases your credit card score. But if your billing cycle is between 8th August to 7th September and the due date is 28th September, we would suggest that you pay your bill on or before 28th September.

Apart from this, credit card companies also give you the option to pay a minimum amount due which is only about 5% of your total due amount. But keep in mind that on paying only the minimum amount due, interest will be charged on the remaining amount and if you think that you will pay the minimum due amount every month and gradually make full payment one day. 

Then you are wrong because the outstanding amount is day by day will keep increasing and your debt burden will increase. But if you do not pay the due amount on time, then it is the most expensive loan in the world. Avoid card companies charging their interest from 30 to 50% on the annum. 

Therefore you must clear the entire credit card bill before every due date. This is an easy way to pay off your credit card bills on time to avoid last interest and keep your credit score intact. There are many options available to set reminders and help you in this, through which you can pay your credit card bill on time. 

We move on to the next step. When you apply for a credit card, the bank sets a limit based on your income and credit score. It is very important to understand that the money you are spending through a credit card is not going out of your pocket right now. 

Due to which you may feel that you have not spent much money and many times due to this we also do unnecessary expenses. That's why we would suggest that you do not use your complete credit card limit and track your expenses and if you do not use your credit limit in full then it will also improve your credit score.

Now let's talk about the timing of the credit card billing cycle every month. You can use it smartly. If you do your major expenses within a few days of bill generation, you will get plenty of time to pay the bill. That is, the time of about 45 days, they also look at an example without any interest to understand it better.

Suppose you have two credit cards. One is yours and one is your partner's credit card, whose billing cycle is from March 2 to April 1. In which the bill date is April and the due date for payment is April 22. On the other hand, the billing cycle of your credit card is from March 20 to April 19, in which the bill date is April 20 and the due date for payment is in May. 

Now if you have to make a huge purchase on 4th April, then according to you which card should be used which will benefit the most. For this, you should use a credit card as its next billing cycle is in the process box of seconds, which will give you a lot of time to make the payment. 

Another tip would be that do not to use too many credit cards. Handling and keeping track of a credit card is difficult for most people. So imagine what will happen to them if they keep four or five. Avoid managing multiple due dates and payments. An important habit associated with issuing the number of credit cards that will be very useful for you is to automate your monthly credit card payments. With this, you will not miss your payment and will also avoid late fees and interest.

Advantages and disadvantages of credit cards:

A credit card gives you the freedom to spend more money in your daily life. But apart from this, it can also save you thousands of rupees over time. There are a lot of benefits you get with a credit card like cashback points vouchers. If you shop, you can take advantage of these. 

Many companies also launch special credit cards by partnering with banks, so that you can get special discounts on these commerce sites and travel food. So you can also select your meal-according credit card and take advantage of it. One way to use credit cards smartly is by limited swiping credit cards. Sometimes you may need to swipe the credit card at the ATM. 

However, you should avoid swiping the ATM card as much as possible as it has many disadvantages. When you buy something from a shop. While using multiple cards, you do not incur any interest at that time, but if you withdraw money from ATMs through credit cards, then interest charges are further levied automatically. Apart from this, you also incur transaction and service charges.

By the way, credit cards are one of the best products, but if they are not used wisely, then these cards can also become a big liability for us. If you have learned something new and interesting from this article, then do let us know in the comment on our website www.tradeipohub.co.in.