Credit cards have completely revolutionized the credit market. This small plastic card comes with loaded perks and benefits. You will find a whole range of credit cards in the market that is designed to meet the different needs of different customers. Frequent flyers can vouch for travel credit cards, shopaholics can vouch for lifestyle credit cards, and so on. For first-time credit card users, credit card issuers have provided secured and lifetime free credit cards. Beginners can apply for cashback credit cards like Flipkart Axis Bank credit card, Amazon Pay ICICI Bank credit card, HSBC Cashback credit card, etc. as they are affordable and are ideal for them. Just having a credit card won’t do anything, you need to be very smart when it comes to using a credit card. We have jotted down 8 tips in this article for effectively controlling credit card spending so that you can make the most of your credit card.
8 Tips to effectively control your credit card spending:
- Limit the number of credit cards: You can control your credit card spending by limiting yourself to fewer credit cards. The more credit cards you have, the tendency to use credit cards increases. For better financial health you should limit the number of credit cards to 4-5.
- Credit utilization ratio: The thumb rule you should apply here is utilizing the third part of the credit card limit that means using the credit limit upto 30% - 40% and not more than this. Utilizing more than 30% - 40% can put you in a danger zone and the chances of fallout increase. You can easily end up in a high debt trap if you do not take care of your credit utilization ratio. A higher utilization ratio affects your credit score as well.
- Paying credit card bills on time: Make this your mantra to always clear your credit card dues on time and in full amount. Never fall into the trap of payment of the minimum balance as it will cost you a higher rate of interest on the outstanding balance in the next billing cycle. Defaulting on credit card bill payments can affect your creditworthiness in a negative sense.
- Select the right credit card: You can effectively limit your credit card spending by simply selecting the right credit card. Analyze your spending habit and accordingly check which credit card provides you benefit on retail spendings, or which credit card provides you the most benefit on travels, and so on. Choosing the credit card that compliments your spending will help you to earn while you spend and this way you control yourself from spending extra penny.
- Use a credit card when it is necessary: One of the most important things for effectively controlling your credit card spending is using a credit card when it is required and not every time and for every purchase. Make smart moves while using a credit card and use a credit card for important transactions that can benefit you in terms of reward points in return.
- Limit your shopping spree habit: Some people have the habit of going on a spree when it comes to shopping and it can cause you great trouble if you use the credit card for such activity because you might spend beyond the pre-approved credit limit which will be difficult for you repay on time and thereby leading to a higher rate of interest. So, to effectively control your credit card spending you need to control your shopping spree habit.
- Set threshold limit: To avoid using credit cards beyond the credit limit or more than the 30% - 40% of the credit utilization ratio you can set a threshold reminder. Whenever it reaches the threshold limit you will be notified about the same and in this way you can make a better financial decision and you will stop yourself from using it after achieving the threshold limit.
- Make calculated decisions: You will be allured by many one-time offers and deals and in those times you need to be very careful and need to make calculated decisions like availing of those deals or offers will be beneficial for you and your financial health or not. If it does not benefit you then you should avoid availing it as it will burden you in the future when it will come to clear the credit card dues.
Bottom Line
Following the above-mentioned tips will manage to control your credit card spending and make the most out of your credit card. To maximize the benefits of your credit card you need to use a credit card wisely. Timely repayment of credit card dues and a low credit utilization ratio is the way to go. Comment down any other tips that you know and we have forgotten to mention for effectively controlling credit card spending.
