For some people having a credit card is nothing short of magic, a source of free credit that can fund their dreams faster than anything else. However, one needs to know that along with its range of benefits comes the bane of overspending. We all must have the slightest idea of how the habit of overspending can quickly spiral into a financial dilemma. For some, it doesn’t take a lot of time to create a debt of 1 lakh Loan to 3 lakh Loan. Follow these tips to get a strong grip on your credit card spending:
Control the number of credit cards you use: In today’s era, it is quite possible that you might have more than one credit card. One for cashback on fuel purchases and while another may give you airport lounge privileges. But do you know keeping too many credit cards together can give you nightmares as tracking expenses can get tougher over time? It is suggested that you should stick to one credit card that offers you the most benefits for the type of expenses you usually make. If you can’t stick to one card for some reason, keep one card for your regular purchases and control the limit of the other card to only specific purposes. It is possible that one card has a credit limit of 1 lakh Loan, and another has a limit of 3 lakh Loan. However, if you are one of those who believe they can divide their spending among 2-3 cards, then keeping these many cards makes sense as it prevents you from exhausting the limit.
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Only use available credit limit: Credit card indeed gives you the freedom to spend, but it is recommended only a 1/3rd of the available credit limit, which could be 1 lakh Loan or 3 lakh Loan, or it could be any other amount as well, should be utilized by you on average. It is because exceeding 40% of the credit limit can adversely affect your credit score to go down. High credit usage portrays the user as credit hungry with a potentially higher chance of default which further makes it difficult for you to access additional credit facilities. To do so, you can combine the use of a debit card to keep this percentage within the 30-40% range.
Maintain a habit of paying off the entire credit card bill on time: Most people only pay the minimum due of their credit card dues of 1 lakh Loan to 3 lakh Loan or another amount due, which can lead to the accumulation of the dues, which further add to your repayment woes. One of the best ways to ensure your credit utilization ratio is low is to pay the credit card bills on time. This will help you in the long run in ensuring that your credit card dues remain within manageable levels.
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Keep your credit utilization ratio low: The ratio shows the relationship between your aggregate spending limit and credit card balances. As a rule of thumb given by a lot of experts, your CUR shouldn’t exceed 40%. It is because high ratios may adversely impact your credit score. A bad credit score can have negative consequences for your financial and personal health. Thus, to be on the safe side, always aim for 30% CUR, as this gives you more breathing room to cover unexpected expenses.
Set spending alerts: Setting spending alerts gives you a real-time response to your spending pattern. You also have the option to set a threshold limit on credit limits which could be 1 lakh Loan to 3 lakh Loan, or on the transaction value that will make sure that you don’t exceed the spending limit set by you in the first place. While you are setting a spending limit on your credit cards, you can also activate security alerts that will detect potentially fraudulent spending patterns.
If possible, postpone shopping: It is recommended that if you are feeling sad or low, hold back your shopping urge till you are feeling better, as negative emotions often lead to a shopping spree. Hence, next time you are feeling low, it is best not to indulge in any retail or luxury therapy.
Use your credit card on things that you would buy anyway: If you are using a credit card for the first time, using a credit card may seem like spending someone else’s money for the moment. You indeed need to pay back the amount at some point, but if you spend on something just because you have a credit limit to do so, it will haunt you in a few days. Hence, you should spend on things that you were, either way, planning to spend on irrespective of payment mode.
Always Remember your financial goals: You must know overspending is a sure-shot way that will distract you from your financial goals. Simply checking with yourself if your buying choices will make it harder for you to reach your financial goals is enough to ensure you use your credit card wisely.
Use the interest-free dates: Use the interest-free period to use your credit card to your advantage. Credit cardholders get a particular stipulated time to make the payment without attracting any interest.
Check your monthly statements: As a credit cardholder, you will receive a monthly credit card statement. Though most people don’t give more than just a cursory glance, reading through your monthly credit card statement is one way to ensure you don’t default against credit, as it leads you to pay fraudulent charges.
Remove your credit cards from online portals: Removing your credit cards from all of your online accounts, especially from shopping portals, will perfectly ensure you do not overspend much, and this can make a big difference. When your card is stored, it is really easy to buy things without thinking much about it, but if you have to manually type in your card number, it requires much more effort on your part, and this is likely to make you think more carefully about the purchases you’re making.
In current times, credit cards are necessary and not together a bad product provided you know how to use them. It is ultimately in your hands not to give in to the urge to spend. A disciplined spending habit can help you use your credit card most efficiently.
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