The use of plastic money has increased over the years, especially post demonetisation. According to a recent media report, by the end of March 2017, there were 29.8 million active Credit Cards in India. Despite the credit aspect and associated interest charges, people have been transacting in large sizes through Credit Cards. The easy availability, advantage of paying through EMI, and rewards and discounts are the major attractions. However, lack of financial discipline and careless usage can cost a hefty price.

Let’s explore 10 smart ways in which you can avoid getting into debt or distress due to Credit Card usage.

Pay Due Amount On Time

If you do not pay the outstanding amount on or before the due date, you are charged interest at a rate that ranges between 24% and 48% p.a. On failing to pay the minimum due amount repeatedly, your CIBIL score will get negatively impacted. So, make sure you pay the outstanding amount on time to avoid paying interest and penalties.

Additional Reading: How To Improve Your Cibil Credit Score

One way of doing it is by setting a reminder on your phone. You can also set an auto-debit instruction with your online banking account to make your Credit Card bill payments on a specific date after the bill is generated.

Maintain Low Card Utilisation Ratio

It is important that you do not exhaust the complete Credit Card limit on a regular basis as it increases your credit utilisation ratio, impacting your credit profile negatively in the long term. Banks and financial institutions identify you to be credit hungry if your credit utilisation ratio is high. A credit utilisation ratio of around 40% is advisable.

Don’t Withdraw Cash

When you withdraw cash using a Credit Card, you do not get an interest-free period on it. You are charged with an interest of around 24% to 48% p.a. from the day of withdrawal. It’s best to stick to Debit Cards, when it comes to the withdrawal of cash, and save the unnecessary interest outgo.

Use The Interest-Free Period Smartly

The easy accessibility of Credit Cards might lead to excessive spending. Remember, it is not a borrowing tool. If you are in a real need to borrow, look for alternatives such as a Personal Loan or other secured loans. The interest rates on these loans are lower than that of Credit Cards.

Make Good Use Of Reward Points

Credit Cards come loaded with benefits such as cashback, discounts, etc. Do watch out for such offers and save on your expenses while shopping. You can also earn reward points on specific merchandise.

Use The Credit Card And Wallet Combination

Some e-wallet companies have tied up with banks to offer an interest-free credit period on transferring money to their mobile e-wallet. You can save a lot more by availing the benefits offered by both Credit Card and e-wallets.

Use Multiple Credit Cards In Rotation

If you have multiple Credit Cards, use them in rotation to keep the utilisation ratio in control. It would also help you to keep all your accounts open and cards active in the long-term.

Get The Right Card That Suits You

There are many types of Credit Cards available in the market with some offering benefits on flight bookings while some offering cashback on fuel etc. You must pick the one that suits your needs best.

Redeem Credit Card Reward Points On Time

The reward points that you accumulate over time can be redeemed to avail discount on transactions. However, these reward points have a validity period. If you do not redeem the Credit Card reward points before the expiry date, your accumulated reward points get wasted. The validity period usually varies from one year to three years.

Read Your Credit Card Statement Regularly

Your Credit Card statement carries all the charges, interest and penalties levied by the Credit Card company. You must read this document without missing a detail. If there is an unaccounted element, you must immediately report to the Credit Card company.

Smart use of the Credit Card not only saves your money, but also improves your credit profile along with adding to your financial reputation.

(The writer is CEO, BankBazaar.com)