Spending becomes easier if you have a credit card. However, any amount spent on your credit card must be repaid within a stipulated period. It is advisable to spend as per your repayment capacity to avoid delay and default in the repayment of your credit card bills.
Here are some tips that can help you follow some credit card disciplines.
Make A Budget
Budgeting helps identify your essential and non-essential expenses and gives you an idea of the total money you will need to spend on a particular thing. List all expenses and categorise them based on fixed and variable overheads. It will guide you to meet your fixed expenses and manage the variable expenses within the money left in hand. You can set monthly financial goals to restrict the variable costs.
Adhil Shetty, CEO, Bankbazaar.com, says, “While using a credit card, you should spend as per your budget and try to achieve your monthly financial goals. It will help you teach financial discipline and avoid delays and defaults in payments of your credit card bills.”
Frequently paying late for your credit card bills can cost you a poor credit score. You may also need to pay a higher interest rate if you delay beyond the due date. Paying on time is a good financial habit to avoid the burden of high-interest payments. Pay your credit card bill within the scheduled due date and avoid paying the minimum amount too frequently.
If you are shopping as per your spending plan and within your budget, there is no harm in getting the benefits of offers and discounts available through your credit card. However, careless spending without thinking of repayments can harm your credit score if you face financial hardship in paying off your bills. Avoid impulsive shopping and buying things you do not even need.
Avoid Exceeding CUR
A Credit Utilisation Ratio (CUR) shows your usage concerning your credit card limit in a month. For example, if your card spending limit is Rs 1 lakh and you use Rs 80,000 from that limit in a month, the CUR will be 80%. If you do it continuously, it may reflect badly on your credit score as it will show you as a credit-hungry user.
Managing Your Overspending
If you have already spent too much and have difficulty paying back your credit card bill, then you can consider the following things. You can convert the outstanding balance into EMIs and repay the same in easy instalments. The other option is to repay the card bill with the help of a low-interest loan, such as a loan against securities, OD against FD, etc. and repay the same slowly in the coming months.
Use your credit card wisely and avoid being financial ignorant to regret it later. Timely payment and carefully using your credit cards will improve your credit score and establish you as a financially responsible person.