Credit Card: Manage Smartly, Increase card limit
Tips to manage credit card smartly, tricks to get high credit card limit, Increase Credit Score by using Credit Card
Credit Card: Most of the banks and now even other financial institutions are focusing on issuing credit cards. Banks and institutions are acquiring a new customer base by issuing credit cards with handsome limits to use and first use offers. You must have seen sales executives canvassing credit cards in Malls, Markets and other places. Banks and other Non banking financial institutions (NBFC) are even canvassing credit cards online through shopping websites like Amazon, Flipkart etc.
Why are all the banks and NBFCs so focused on credit cards! What is a credit card? How can I get one credit card and eligibility criteria to get a credit card? How to use a credit card effectively? Is it beneficial to use a credit card for shopping? What are the negative factors of credit cards? How to enhance a credit card limit?
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Why are all the banks and NBFCs so focused on credit cards?
Credit cards are backed with so many lucrative offers that when a customer is approached, he/she can hardly deny to use it and avail the offers. It is a very easy and large market to penetrate by banks and NBFCs. The segment has shown very rapid growth in recent years specifically after pandemic. When a customer is using a credit card there are many chances to earn income from it. The interest rates charged on non regular payment can be up to 36% with late payment fee, which no other credit product fetches for a bank. The annual maintenance charges are icing on the cake for the issuer bank.
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What is a credit card?
A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment. It works as a debit card issued by a bank, the only difference is, one can use it without having a balance in your account and can pay the dues on a particular date in cycle usually for up to 50 days from the date of payment.
There is a fixed amount which you can use for shopping which is decided as per customer’s eligibility. Some private banks and NBFCs are issuing good credit limits even to a new customer.
Higher limit on credit cards does not mean that you have more money, it only means that it gives you more time to pay for your purchases.
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How can I get one credit card and eligibility criteria to get a credit card?
Commercial Banks and NBFCs as per RBI guidelines in India can issue Credit cards. It is not necessary to have a savings bank account to get a credit card from the bank. There are some criteria which are followed by almost all the banks and NBFCs for example income of the customer, credit report, details of bank account in which the salary or the business transactions are maintained.
How to use a credit card effectively?
Using a credit card smartly is very necessary as it can have a direct impact on your Credit score. One should try to use 30% of the credit card limit and pay the amount used on or before the due date, not doing so, not even making you pay interest on the used amount also has a negative impact on your credit score.
In addition to this, Credit card users can get very lucrative offers by using it for shopping in malls, buying fuels and online shopping. One should avail these offers as per his/her repaying capacity.
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Is it beneficial to use a card for shopping?
Yes, If we use this smartly, there are many benefits. some of which are as under –
- Carrying a card is much safer than carrying cash,
- Use credit cards to make payments and pay for them later,
- Lot of welcome benefits including e-gift vouchers, huge reward points, gift vouchers, etc.,
- User gets reward points, cashback, discounts and offers on various purchases,
- Credit card companies partnering with certain e-commerce companies provide cashback on various purchases.
- Discounts on dining, shopping, hotels, movies, flights, etc.,
- You can get complimentary access to airport lounges wherein you can relax and enjoy unlimited free food and beverages,
- Travel cards and other premium cards provide free travel insurance which can provide a cover against air accidents, baggage theft or loss at foreign countries, overseas emergency hospitalization, etc.
- Using this will help you to build a good credit score on consistent repayment. Which helps you get easy home loans, car loans, personal loan, business loans, agriculture loans etc.
- Some credit cards offer complimentary golf rounds at golf courses around the world.
- Shop accessories, gadgets, appliances and various other household items using a credit card and pay for them in EMIs without any interest rate,
- Lifetime free cards which can be availed at free of cost, and there is no annual fee charged on the card,
- Get up to 3% of fuel surcharge waiver on fuel credit cards.
What are the negative factors of credit cards?
There are some factors which you should always keep in mind while using a card, otherwise it may have an adverse impact on your finances. Some of which are as under –
- Late Payments – Every delayed or partial payment affects your credit score and makes it difficult to qualify for loans or new credit cards.
- Encouraging impulsive and unnecessary “wanted” purchases
- High-interest rates if not paid in full by the due date
- Annual fees for some credit cards – can become expensive over the years
- Fee charged for late payments
- Negative effect on credit history and credit score in case of improper usage
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How can you get the credit card limit enhanced?
There are some key points which can help you in enhancing your card limit which are
- Credit limit greatly depends on credit score
- Repay dues on time
- Be careful about the Credit Utilization Ratio, Experts suggest that you keep this ratio below 30%.
- Show proof of increase in income
- Reduce the financial obligations you have
- Apply for a new card
Finally, to avoid shopping more and more due to unfettered spending on your card, read the fine print of all the charges and conditions. Don’t spend more than you can pay back. Avoid putting daily purchases on your card. Periodically check your credit limit. Choose an EMI option for large purchases. Plan your purchases. Avoid impulse buys on your card. Always try to pay your card bills in full each month to avoid the interest charges. Never miss a card payment.
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