This is how you can make your credit card work for you, not against you

I always end up paying a late fee on credit cards as I don't get the statements on a regular basis. Are credit cards a liability? How to use credit cards to our advantage? A Sitamahalakshmi, Hyderabad

Credit cards usage and the number of credit card payment transactions decrease due to the rise of digital wallets and mobile wallets. However, there was a sudden and brief surge in usage volumes of credit cards during the Covid-19 lockdown period. The surge can be attributed to a spurt in online shopping during the lockdown period. The surge is because consumers keep cash for a rainy day by using cards. The other reason could be that people do not have the money, and they would have to put it on their credit cards. Of course, there was a sharp decline in credit card transactions after the second wave of the pandemic. The usage of credit cards has its own merits and disadvantages. Excess usage without care and spending without money can lead to a pile of debt you struggle to repay for years.

Here are some crucial points for using your credit card wisely. Credit cards are a convenient way to make purchases, both online and in POS. However, avoid using credit cards to purchase things you cannot afford, especially for the sake of earning rewards. One must set a limit for credit card spending according to the repayment capacity. Having a realistic budget or upper limit for spending can certainly keep you from getting into the debt trap. Your credit card spending must not be more than the amount you can pay off by the due date. Credit card spending in line with your bank balance or income will save you from late fees, interest, and other financial charges. Paying through credit cards is convenient and more comfortable. Nevertheless, they make you lose control over money on the flip side, and you indulge in overspending. Credit cards can fetch you some offers, discounts, and points if used smartly.

Use cash instead of credit cards to control the purse strings to avoid credit card balance transfer situations. Often, we ignore or neglect the credit card payment reminders and end up paying heavy penalties in the form of late fees and interest, and other financial charges. So no matter how busy you are, wake up and get organized. List down the details of all credit cards in possession in a spreadsheet or notepad - key in the Card number, expiry month, billing cycle, and due date. This information can come in handy if you lose your credit card or wallet. Don't fall into the trap of minimum payment. Always ignore the minimum payment tab for each card unless you cannot pay the total amount. Do not use multiple cards and spread out outstanding if you face financial difficulties. You will have to cough up the late fee for each card, which is not wise or sensible. Do not get into the balance transfer situation.

Discharging all loans, including credit card dues, is vital because payment history is vital to credit score. Do not fail to make the credit card payments before the due date. Paying after the due date will ruin your credit history and score. Improve and safeguard your credit score to avoid problems while getting a loan in the future. Do not be ignorant about the credit card monthly statement. Always look at the statement to verify and trace the transactions. Make a conscious effort to monitor the statement and transaction. Be attentive and report the matter to the card-issuing bank if there is a dubious transaction or you are sceptical about an amount. Nobody wants to lose a credit card.

However, we must accept the inevitable and act immediately. As a first step, call the customer care of the credit card issuer immediately to report the loss or theft of your missing card. Certain credit card issuers have a dedicated number for reporting the loss of cards. Next, inform all the card-issuing banks and get your cards blocked if you lose your wallet. Then, you may place a request for a new credit card in place of the lost card. These days, the banks replace the credit cards within three to seven days and get them delivered to your doorstep.

Don't forget the due dates, as clearing the credit card dues on time should be the most important thing on your to-do list. You have the option of setting up auto-pay through your bank in order to avoid the late fee and interest charges. Take advantage of discounts, cashback, reward points and various offers before they lapse. Without any doubt, credit cards are the most accepted payment method across the globe, both online and offline. Use your credit cards wisely and strategically.

(The author is a SEBI licensed Research Analyst. The alumnus of the Indian Institute of Foreign Trade (IIFT), he had held leadership roles at National Geographic, Reliance Radio Television Luxembourg, STAR TV, etc)