Credit Cards: How to use your credit cards during Covid 19 crisis

  • by
Credit Cards: How to use your credit cards during Covid 19 crisis

Are you new to the concept of credit cards and planning to get one? Or someone who already holds multiple cards but never got into the nitty-gritty of it? Whatever side you belong to, this article will surely have something in store for you. Unprecedented times like these have made everyone rethink their financial decisions and then restructure accordingly. And when we talk about anyone’s financial condition, credit card plays a significant role. Not to forget, if plastic money is used judiciously, you might never have to stress over carrying enough cash when going out. From paying utility bills to buying daily essentials, it can end up becoming your closest financial ally. Moreover, using a credit card over standard currency has its perks. Some of you might already be enjoying those benefits like scoring reward points, cash back on purchases, discounts on a certain website, etc. Thus, along with functionality it also helps you in saving money if you earn back some of what you have spent through reward points.

How credit cards help your finances in a covid crisis?

How credit cards help your finances in a covid crisis

The coronavirus pandemic has shaken the economy of the world from the core, and economists are still not sure about the recovery time. With people being engrossed in making a living, a crisis like this has made everyone question their physical, mental as well as financial health. Especially people with little financial knowledge have been shaken by that sudden slap on their face during a joyful dance.

Amid people getting burnt with layoffs, salary cuts, and businesses shutting down, we all still have to figure out a way to put food on the table. A credit card gives you the convenience of making a purchase now and repaying dues later either with o or low interest depending on the time taken to repay the amount. Therefore, we have some tips for you to use your credit cards efficiently during covid times that will also hike up your credit score:

Review your credit card statements
  • Review your credit card statements

Keeping track of your credit card statements puts you in a better place than you can foresee. By just analyzing it, you can pick if any higher credit card charges are being imposed, or maybe due to some technical error you have been charged higher interest.

  • Pay your dues on time

Credit cards if not used responsibly can become an issue of concern. Thus, it is recommended to make payment of credit card dues on time. To do so, one can either opt for an autopay facility or set a reminder for all their credit card due dates and can avoid that hit on their credit score.

  • Make full or maximum payment

It might seem convenient and an easy way out to pay minimum credit card dues just to avoid those penalties. Little did you know, it will only increase your debt burden because of the higher interest rate on the outstanding balance. And it is something one should take seriously to manage their finances.

  • Use credit cards with higher limits

If you are planning to use one during a pandemic, try to use a card with higher spending value and be prudent with its use. Using less credit on higher value card put you in good books of credit bureau companies that boost your credit score.

Good time to use those reward points
  • Good time to use those reward points

There is no better time than now to use those highly praised credit card rewards or loyalty points. Apart from this, depending on the variant of the card, you get discounts on movies, restaurants, affiliated websites, electronics, and more.

However, don’t forget that the financial benefit given by credit cards doesn’t make you entitled to spend it like your own money. It is like a short time loan that has to be paid back in a given period. Therefore, if you are someone who doesn’t have the funds to afford your lifestyle, credit cards might not be the best option for you to rely on.

Should you use credit cards to pay your house rent?

Should you use credit cards to pay your house rent

During times like these when financial instability has become a new normal, people have started relying more on their credit cards for buying as trivial things as chips to as substantial things as paying their house rent. Several companies like, CRED, RentPay, and many more allow tenants to pay their rent using a credit card and the amount gets transferred to the landlord’s account. Nevertheless, you are required to submit a rental agreement if the amount is more than Rs 50,000 per month.

But have you ever wondered that is it good for your financial health? Is it that blessing in disguise or a curse you can’t see? Well, to take the decision wisely of paying your rent let’s understand it in more depth. If you are someone who is already facing a cash crunch due to the covid19 crisis then this should not be your primary option to pay rent. Rather you should begin with talking to your landlord about the challenges and request a grace period for a couple of months. If that option doesn’t work out then pull out your savings or try to borrow money from your friends or relatives to pay the rent.

But if nothing works out and paying your rent through credit card is the only option left, then you need to know that it will only resolve the prevailing issue for the short term. How so? For someone who already has disruptive cash flow, this step would only make things worse as you will have to repay the credit card bills after a month or so. And if you fail to do so on time, you will end up getting back in the same cycle. However, this time you will have the double financial burden of paying your credit dues along with additional late payment fees that will negatively affect your credit score. Also, the interest rate on credit cards can go up to 30 percent per annum which doesn’t make it a beneficial deal.

Now coming back to the companies that provide you this service, some of them do not take any registration fees but do take a commission when you make a transaction using their website or app. As you go for the registration they ask for your landlord’s details like PAN number, bank details, etc. which your landlord might not be comfortable sharing with you. So, before you jump to any decision just outweigh all the available options.

How to use your credit card judiciously?

With every privilege comes great responsibility, and the same philosophy applies to credit cards. Plastic money can either be your best friend or your worst enemy; it all depends on how wisely you use this tool. It gives you that financial freedom in times of need but if exploited can become your biggest nightmare. Thus, we have some excellent tips that can be used to take full advantage of your credit cards and not getting soaked in debts.

Timely payments
  • Timely payments

The fundamental rule of using your credit card responsibly is to pay credit card bills on time. That one default might not seem like a big deal to you but it will cost you a penalty and plunge your credit score. The best way to be more disciplined about your bill payments is by setting a reminder or using auto payments.

  • Low Credit Utilization Ratio

To maintain a stellar financial scorecard, the credit utilization ratio (the credit you are using divided by the credit limit you have) should be kept less than 30 percent. As the ratio will increases, your credit score will dip.

  • Maximum repayment

Ideally, if you can then you should make full payment of your credit dues to avoid penalties and high-interest rates. However, if that is not possible then at least make maximum payment to save that credit score from getting adversely impacted.

  • Select your ideal card

As simple as it may sound but it is significant to know which credit card fits you best to get the maximum benefit out of it. There are several options in the market with different pros and cons. So, decide what you are looking for and choose the right fit.

  • Withdrawal of cash using credit card

Yes! You read it right; some credit cards allow customers to withdraw cash through ATMs. Though what you might not be aware of is that the credit card companies take high fixed charges, and from day one of the withdrawal the interest is levied which is around 2-4% per month. It is an expensive affair therefore should be shunned at all cost.

  •  Drop addiction for reward points

Are you someone who gets excited by reward points and ends up spending more than required? If so, then you need to take a break, and think if spending money just to earn loyalty points which will lose its value with time is worth it? Also, a quick tip for those reward hoarders, use it within a year or so before it expires.

  • Avoid closing your credit card suddenly

This is a substantial point to achieve a blooming credit score because if you randomly close any of your credit cards, it shoots up the credit utilization ratio. And as we already know higher credit utilization ratio means a lower credit score, thus your creditworthiness comes into question.

What to watch out for?

What to watch out for

Along with all the benefits that come with credit cards, each one of us also has the risk of becoming a victim of fraud. There are multiple credit card frauds prevailing in the world and with each passing year, the number is only escalating. Therefore, we must do whatever we can to protect ourselves from such nuisance:

  • Be careful while you are making payment using a credit card at the point of sale device. The fraudsters attach a device that extracts all your necessary card details as soon as you swipe it. To be sure that no such device is attached to the POS machine, you can shake it before making any purchase.
  • No matter how close that person is to you or how urgent the matter seems to be, don’t share your credit card details with anyone. If you ever receive any calls from customer care asking for confidential information, never share it as banks do not ask their customers for that information.
  • As the number of websites is increasing rapidly that doesn’t mean you can trust all of them and carelessly use your credit card details to make an online payment. Allow yourself to use your credit card only on trusted websites. Also, restrict yourself from clicking on links that ask for bank details. This is a common type of fraud where the fraudster obtains sensitive information and then misuses it.
  • Check your credit card statement every month to see that everything is in place and there are no hidden charges. Also, if there has been any transaction that was not initiated by you, then inform the credit card company immediately.
  • If your credit card ever gets lost or stolen, immediately report it to avoid any uncalled fraudulent charges on your name. To be prepared for situations like these, always have your credit card companies’ numbers stored in your mobile.

A credit card is an extremely wonderful tool if used with responsibility and all measures are taken to safeguard ourselves from frauds. Never forget that your credit card usage and credit score go hand in hand. Thus, pay your bills on time, avoid entirely utilizing your credit limit, don’t spend for the rewards, be aware of all the perks your card provides, and more. Lastly only spend using your credit card when you know you can clear the dues on time or else with all the penalties and interest rates, in no time it can become an expensive debt.

How credit bazaar can help you with your credit cards?

How credit bazaar can help you with your credit cards

If you are having sleepless nights because you are unable to make credit card payments on time and because of that you have a huge dent in your credit score. Well, you can take help from the credit bazaar to get expert advice on the challenges you are facing. Once you sign up, the credit bazaar sends you a monthly credit report and CIBIL scores in your inbox. They also mark the red flags and you can speak to their experts when confusion arises.

Not just that, Credit Bazaar is in association with multiple credit lenders across the county and when the time comes and you need a loan, you can easily avail of one from their portal.

Leave a Reply

Your email address will not be published. Required fields are marked *