How to Use Credit Card?

Credit cards are convenient as they make financial transactions quick and easy. But, if you do not know how to use a credit card correctly and to its fullest potential, it can also become a debt trap. Read on to understand how to utilize the benefits of these cards without making them a liability.

What Is a Credit Card?

A credit card is essentially a personal loan. It comes with a credit limit, and you can use the card to make payments online and in physical stores. Credit card companies generally allow you 20 to 50 days to pay the dues. But if you fail to pay the credit card bill on time, they charge you interest on the outstanding amount along with a penalty fee.

How to Use Credit Card?

The use of credit cards can be tricky if you are not careful about your spending habits and bill payments. There are a few ways you can manage a credit card and enjoy its benefits without facing any financial risks. Check out these six tips that can help you use the card effectively.

Pay the Credit Card Bill on Time

Paying your credit card bill on time is crucial as failing to do so entails many disadvantages. If you do not pay the dues on time, the credit card companies will charge you a penalty fee and you will also have to pay interest on that amount. Moreover, late payment of credit card bills negatively affects your credit score, making it difficult for you to get a loan or another card in the future.

The simplest way to tackle this issue is to set a reminder about the due date on your phone. You may also opt for the auto-payment option that allows the card issuer to deduct the amount automatically from your bank account. Even if you miss the due date, try to pay the bill before the next cycle. You will still have to pay the penalty charge, but your credit score will not be affected.

Learn About the Credit Card Fees

There are multiple credit card charges that can make it an expensive option, especially if you do not use it responsibly. Some of the most significant fees include the following.

  • Annual fee: Some credit card companies charge you an annual fee just to use the facility. Ensure you ask them about this fee before applying for a card.
  • Late payment fee: You need to pay a late payment charge if the dues are not paid on time. This fee can be anything between 20% and 40% depending on the issuer.
  • ATM withdrawal charges: If you use a credit card to withdraw cash from an ATM, the card company charges you a 3.5% cash advance fee. You will also have to pay interest on the amount withdrawn. It is charged on a per-day basis, starting from the withdrawal date. So, try to avoid using credit cards for ATM withdrawal to save yourself from credit card cash withdrawal charges unless it’s an emergency.

Keep Your Credit Card Balance Low

Keeping your credit card balance low is a great way to maintain a good credit score. The amount of money you spend on your card in a month from the available limit is your credit utilization. If the credit limit is ₹1 lakh and you spend ₹50,000 from it, the credit utilization limit will be 50%. The lower this ratio is, the better will be your credit score. Also, if the balance is low, it will be easier for you to repay it on time and avoid credit card late payment charges.

Pay More Than the Minimum Balance

The credit card companies give you an option to pay only 5% of the total due every month. It is known as the minimum amount due. But, if you pay only the minimum amount, they will charge a 3% interest on the balance amount next month. If your total bill is ₹10,000 and the minimum amount due is ₹500, it is better to pay off the full amount. Otherwise, you will be charged interest on the remaining ₹9,500, amounting to ₹285. If you keep paying only the minimum due, you will end up paying ₹13,254 as interest over 34 years!

Track Your Credit Card Spending  

You can easily keep track of credit card transactions to avoid overspending. The card companies send you regular statements that show all your expenses. This allows you to remain aware of your spending habits and manage them better. The statement also helps you determine if there are any unauthorized expenses, in which case you can contact the financial company to resolve the issue.

Enjoy Rewards and Cashback

When you use a credit card, you can earn reward points. When you have enough reward points, it is possible to use them as cash to buy products, pay bills, or purchase e-vouchers. You may also get cashback and discounts when using the card online, allowing you additional saving on your purchases.

Benefits of Credit Card

You can make up for the interest, charges, and annual fee for the credit card from the many benefits it comes with. Check out the below list to know the advantages.


You can significantly benefit from using credit cards to shop online. Most digital stores offer credit card benefits like discounts, no-cost EMIs, cashback, and reward points. So, before buying anything online, check if there are additional offers on using your card.


Frequent travellers can use their credit cards to enjoy many additional benefits. Depending on the card you hold, companies provide lounge access, air miles, hotel discounts, low foreign transaction fees, discounts on car booking, and much more.


Do you frequently visit movie theaters and order food online? Most websites and apps like Zomato, PVR, and INOX offer discounts on various credit cards. So, you can save big on entertainment expenses using your credit card.


1.  How to get a credit card?
You can apply for a credit card on the issuer’s website or directly from your bank. They check your credit score and income before approving the application.

2. When should one use a credit card?
Credit cards can be used for various purposes. You may purchase products online or from a shop, build or improve your credit score, earn rewards, and enjoy cash-free payments on the go.

3. How much should one charge on a credit card?
You must use your credit card keeping in mind that you will pay the due amount on time and preferably in full. So, try not to spend any amount on your card that you cannot repay.
When you know how to use a credit card responsibly, it can be an asset. Keep the above mentioned tips in mind before applying for one and avoid using it unnecessarily

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