How to use Credit Cards in a smart manner

What are Credit Cards?

A credit card is basically a card that helps one to get instant payment. But note that it is a loan that is provided by the bank for some duration. Later one had to pay the amount.

Difference between credit cards and debit cards?

In simple words the amount that you have in a Credit card is not yours it is given by the bank. But you have to pay in the future. Whereas the amount which is in the debit card is your money you can use according to your way. You don’t have to pay anyone.

What is the advantage of using Credit Cards?

There are lots of advantages of using Credit cards some of which are listed below:-

  1. If you want money in an emergency you can use a credit card.
  2. There are lots of reward points that are provided. By using rewards points one can buy things they want. ( You can’t buy a house πŸ˜‚ )
  3. It helps to improve your Cibil Score if you are paying credit card bills from time to time.
  4. The best part of credit cards is you get an interest-free loan for some period( It depends on the bank ).

What is the disadvantage of using Credit Cards?

The disadvantage of using Credit Cards are as follows. I know you all know disadvantages if you are a credit card userπŸ˜‚ but let me tell might someone who would make up their mind about using a credit card:-

  1. High-interest rate ( 2.5%-3% per month ). Yeah, that means around 40% annually 😱
  2. If you are not able to pay your credit card bills on time so it will impact your cibil score.
  3. You have to pay the minimum account due if you forget.
  4. If your Cibil Score is very bad then there is a high chance that you will get a loan at a very expensive level.
  5. Sometimes you even don’t get a loan because of a very bad Cibil Score.

What is Cibil Score?

The Cibil Score is basically your credit history. The Cibil Score ranges from 300 – 900. Let’s break down your Cibil Score.

300-550 – Poor Cibil Score

550-650 – Average Cibil Score

650-750 – Good Cibil Score

750-900 – Excellent Cibil Score

Do comment below what’s your Cibil Score πŸ‘‡πŸΏ

How do banks make money using Credit Cards?

Some of the methods of bank make money using Credit card are as follows:-

  1. Annual Charges
  2. Cash Charges ( for your kind information you can’t take cash from credit card if you do you are charged a good amount )
  3. Late payment charges
  4. Minimum Account Due charges
  5. Hidden Charges

How to use Credit Cards in a smart manner?

1. The first step is to have control over yourself.

2. Learn more about personal finance. Read blogs like usπŸ™‚, and watch YouTube videos related to personal finance.

Note above two steps are very important if you want to master personal finance.

3. See to it that you pay 0 maintenance or annual charges (this depends on the bank ).

4. Don’t overspend your credit limit.

5. Pay 100% of your credit bill. Don’t even balance a single cent.

6. Make the credit card work for you.

Should you buy Credit Cards?

It totally depends on you. I can’t stop you from using Credit Card but it’s your call I am giving some bonus tips so that it will help you whether you should buy a credit card or not.

  1. If you can’t make credit card payments on time then this is not for you.

2. If you don’t have money then this is not for you.

3. You can’t use the credit card only for rewards is not for you.

4. If you want a high security card then the credit card is for you.

Now you know how to use credit card in a smart manner now it’s time to know some rich vs poor difference.

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