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Updated: 13-11-2024 08:12:08 AM

While credit cards have become quite a common financial tool in India, a lot of users are still apprehensive about putting expenses on their cards regularly. Many cardholders only put big-ticket purchases on their credit cards to avail the EMI benefit without utilizing the benefits of the cards to their best advantage.

It is the fear of running into debt that keeps people from using the card. However, with proper usage of the card and paying the bills on time, credit cards can be really beneficial. So, here we will talk about how to use your credit cards for maximum benefits.

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Pay Your Credit Card Bills on Time and in Full

Pay Your Credit Card Bills on Time and in Full

Credit card extends a line of credit to cardholders. Users have a chance to make interest free purchases for a certain time, 30 to 50 days.  During this period they won’t incur finance charge. However, this facility is provided only if the user clears the dues by the due date and does not make any cash withdrawals.

Failure to do so will result in finance charge, also known as credit card interest rate. This interest can go as high as 42% p.a. and is applicable from the day of transaction until the amount is paid off in full.

So, a credit card will not turn into debt till you keep paying your bills timely.

Want to know how credit card interest rate is calculated?

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Understand Credit Card Fees & Charges
Use the Right Card for the Right Purchase

Understand Credit Card Fees & Charges

Besides, credit card interest rates, there are a few other charges that you should be aware of. These are:

Overlimit Charges: Card issuers assign a credit limit on your card, which is the maximum amount you can spend. If you go over this limit, the bank will impose a fee and might even block your credit card. Overlimit fee is usually charged as a percentage of the amount you spend over the assigned limit.

Note

Consider using only 30% of your credit card limit. This will show the banks and credit bureaus that you are not credit hungry. This will help maintain/improve your good credit score.

 

Late Payment Fee: If you fail to pay off even the minimum amount due by the due date then you will be liable to pay the late payment charges. You also risk getting your credit card blocked. Late payment fee is also charged as a percentage of the outstanding amount. So, if you have Rs. 20,000 outstanding balance, late fee at the rate of 3% will amount to Rs. 600. You should pay the dues by the due date to maintain a healthy credit score.

Foreign Transaction Fee: If you are a frequent international traveller, chances are you are being charged a hefty foreign transaction fee on each and every international transaction. It is usually about 3.5% of the transacted amount.

We suggest you get a 0% foreign transaction mark-up fee credit card or a forex card, for international transactions.

Cash Withdrawals: Cash withdrawals, also known as cash advance, is one of the most expensive forms of credit that you can avail. You will incur finance charge from the day of transaction till the amount is paid off. You will also incur a cash withdrawal fee, which can be anywhere around Rs. 150 to Rs. 300.

These are the prominent fees and charges that you should be aware of. As you can see if you make timely payment and don’t withdraw cash then you won’t incur interest which is the leading cause of debt spiralling out of control.

Use the Right Card for the Right Purchase

It is a good practice to identify your spending habits and then get a card that complements your lifestyle. Given below are some common spender categories and the types of benefits they should look for in a credit card.

Spender’s Category Benefits to look out for
Shopper Cashback, discounts, No-cost EMI, Bonus Reward Points, Grocery offers
Traveller (Domestic) Lounge Access (Airport & Rail), Airmiles, discounted or free travel tickets, Dining offers, Discounted Hotel stays, Travel insurance
Traveller (International) Airport Lounge Access, Low or zero international transaction fee, Discounted Hotel stays, Dining offers, Airmiles, overseas medical insurance, Travel insurance, car rental services
Entertainment Seeker Cashback/discount on movie tickets, dining offers
Commuter Fuel offers, Metro Offers, Ride sharing app offers

 

Note
If you find that the card that you have fails to meet your spending pattern, consider getting another card. If you have to pay steep annual fees on such a card consider cancelling it after you get a new one.

Credit Card Benefits for Frequent Shoppers

Most people fail to make full use of the various benefits credit card provides to shoppers. The offers include but are not limited to No-cost EMI, cashback, discounts and bonus reward points.

If you have a credit card, you should explore the offers that are available. You can also visit various merchant websites for the same. This will require time; however, the potential savings will be well worth the effort.

Want to save more on shopping?

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Credit Card Benefits for Domestic Travellers

There are many credit cards that offer a whole gamut of perks aimed to make travellers journey convenient. If you are a traveller, look out for the following perks which a good travel card has to offer:

Free Lounge Access: Airport Lounges are a place where you can relax while you wait to catch your flight. You may get food, drinks, showers, bed, and perhaps even a spa. The best lounges are affiliated with American Express Lounges, Dragon Pass Program, MasterCard Lounges and Visa Lounges.

Airmiles: Unlike credit cards that offer reward points, travel cards reward users with air miles. Airmiles can be redeemed against flight tickets and sometimes against hotel bookings.

Suggested Read: Beginner’s Guide to Air Miles: How to Earn and Redeem.

Free Flight ticket: Certain credit cards provide free flight tickets as part of welcome benefits or spend milestone benefits. These free tickets mostly waive off the base fare of the tickets.

Hotel Memberships: Premium travel cards also offer free memberships to hotel chains like Taj, Marriott, etc. Through these memberships, customers can get discounts on hotel stays, dining, and so on.

Comprehensive Travel Insurance: Travel cards provide insurance that covers:

  • Loss of luggage
  • Death by air accident
  • Delayed Luggage
  • Trip delay or cancellation

Credit Card Benefits for International Travellers

Credit cards for international travel provide many of the benefits that domestic air travel cards provide. The few differences being that the Priority Pass lounge access can be availed when at overseas international airports. Also, overseas medical insurance is provided. Other benefits that can be utilised by international travellers are given below.

Note:
The overseas medical insurance coverage provided by credit cards is not recognised by countries that require visitors to get medical insurance. If you are travelling to such a country get proper medical insurance.

 

Low or Nil Foreign Transaction Fee: As previously discussed, these charges are applied on each individual international transaction. Cards designed for foreign travellers usually charge fee about 1.99%. However, there are few cards that do not charge this fee.

Car rental services: When you are abroad, you will require transport services to get about. Many credit cards offer discounts and other offers on car rental services like Hertz.

Entertainment Benefits on Credit Cards

If you regularly like to go out to concerts, watch movies, dine out then you should consider getting an entertainment credit card. The benefits that are usually provided by such cards are:

  • Discount on Movie tickets when booked through PVR, INOX or other partners
  • Discount on events including movies when booked through BookMyShow
  • Discounts or offers on dining
  • Zomato/Swiggy Offers

Read More: Best Entertainment Credit Cards in India

Credit Card Benefits that will suit Commuters

SBI Cards and ICICI Bank have launched credit cards in association with metros of various cities. These cards provide auto recharge facility, discounts on fare loading and more.

If you prefer travelling via ridesharing companies like Ola then you can get credit cards that will make such journeys rewarding. For example, Ola Money SBI Credit Card offers users 7% reward points on Ola rides, 1% rewards on all spends and much more.

If you prefer travelling in your personal vehicle then you can avail fuel credit cards. Such cards reward your spends in the form of fuel points. These can be redeemed against fuel alone. There are other types of fuel card as well which offer cash back.

To explore the different types of fuel credit cards that are currently being sourced, click here.

Credit cards when used responsibly can be a great monetary tool that let you build a credit score, provide funds during a crisis and make everyday purchases rewarding. To make the most of your credit cards we suggest that you identify your spending habits and then get a card that complements it.

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