While a Credit Card is a wonderful tool for enhanced liquidity, irresponsible usage can wreak long-term damage. Here’s how to keep your card usage in check to maximise the benefits of owning a Credit Card.

A Credit Card is a wonderful tool to get some extra liquidity. It gives you precious extra cash cover. Most importantly, it allows you to borrow money with an interest-free period. And then come the reward points. Credit Card companies offer various benefits and perks. For instance, a card lets you save money on air travel with reward points. Then, it may let you enjoy the lounge of an airport free of charge. Credit Cards are necessary, useful, and a responsibility.

Irresponsible use of Credit Cards can create problems. After all, it is a loan with more flexibility. Try following the things in the list below, and you will be good to go.

Don’t ever go down the minimum due payment route

It’s an absolute blunder. Mostly, the minimum due is set at around 5% of the total bill amount. If you pay this, you’re not charged any late-payment fees. Credit Card providers also let the customer keep using the card. However, there is a catch here. It leads to a rapid surge in your debt levels. Fees on unpaid dues are steep and are charged daily.

Credit Card fees are extremely high. They can rise to 40% per year. Whatever new transactions you make begin to draw additional charges as well. This would continue until you have paid off the full amount due, including any penalties that you have accumulated. You should then keep an eye on your Credit Score. A low score impacts your chances of applying for other financial products. Home Loan and Credit Card applications may be rejected due to lower credit scores.

Additional Reading: 3 New Year’s Resolutions To Raise Your Credit Score In 2022

Using you Credit Card to withdraw cash? Stop!

Another classic mistake. When you withdraw cash using your Credit Card, you pay for it. Quite literally. These fees are charged from the time you withdraw money until you pay it back. Advance fees for cash go up to 3.5 percent, and the high finance charges range between 23 percent and 49 percent p.a. on cash withdrawals. If you withdraw cash from your Credit Card and are unable to repay it back quickly, it is likely that you will end up paying high fees for cash withdrawal. This option of accessing cash should be the last resort. In case of an emergency, there are various Personal Loan providers that offer instantaneous disbursal. Taking that route would cost you less and would get you an organised repayment scheme.

Don’t get lost chasing rewards and perks

YES! The reward points system is a big factor for someone to get a Credit Card. However, it can be counterproductive if you end up buying more than usual to ramp up your reward points. The attractive perk system may tilt you towards being irresponsible with the Credit Card.

Maintaining financial discipline plays a big role here because it’s very important to not lose control when it comes to making purchases using Credit Cards. It is easy to give into the temptation of buying or getting more, but it’s crucial that we stay in control of our spending. The difference between Credit Cards helping or harming your cash flow is the discipline of setting a spending limit.

Additional Reading: Pay No Heed To These Money Management Myths

Having a credit limit doesn’t mean spend till the last penny

Doing this impacts your Credit Score negatively. It is generally considered an over-dependence on credit lines. It is recommended that you keep your credit utilisation ratio at around 40% of your total available credit limit. However, if you find yourself crossing that threshold too often, consider getting another Credit Card for some extra cover. You might be able to get a greater credit limit if you have many Credit Cards. One card issuer, for example, may offer you a credit limit of Rs. 2 lakh. However, if you have two Credit Cards from different issuers, your total credit limit might be Rs. 4 lakh.

Some extra cash buffer is always a good thing to have, and the deal just gets sweeter when ample rewards are involved! Get the best Credit Card suited for your needs right here.