30 MAY, 2022

Having a credit card can do wonders for you. It is an interest-free loan that helps you indulge and lets you buy things spontaneously. If you get your hands on one of the best credit cards in India, life only becomes better. The convenience, ease of spend, reward points, and exclusive Card member perks make a credit card an even more enticing piece of ownership. 

 

While the benefits are many, there is a grave downside as well – the debt trap. It is very easy to overspend when you use a credit card. Repeatedly getting high credit card bills that you are unable to repay can eventually land you in a serious financial dilemma. 

 

If your credit card payment is outstanding for over 60 days, credit card companies levy a penalty. This penalty rate is set as high as 30% and keeps getting charged on the unpaid bill amount. The accrued amount is higher than one accounts for. Another severe financial implication is a lower credit score, which in turn leads to difficulty in getting loans or getting them at high rates of interest. You can prevent staggering credit card bills and avoid this negative ripple effect by adopting a well-organized approach to swiping your card. 

 

Managing your credit card bills is not tough, with a few tricks under your sleeve you can keep them in control. 

 

Here are a few steps to manage and control your Credit Card bills

 

Step 1: Don’t go overboard with your credit card collection 

Getting a credit card is quite easy these days, but that does not mean you sign up for every offer that comes your way. Limit the number of credit cards in your name. One card may offer lounge benefits and air miles while another may give you dining discounts and hotel concessions; all this may seem great, till it doesn’t. Having multiple credit cards makes it difficult to manage your monthly spending and you won’t realize when you have exceeded your budget. Try and stick to one or two cards at the max.

 

Step 2: Be a responsible spender 

To be a responsible spender there are many things you can do: 

Use a credit card prudently — If you are swiping an item on your credit card, that you cannot pay off in a short period, ideally three months, don’t buy it. 

 

Follow the 1/3rd rule of the credit limit – Just because you have a good credit limit, does not mean you spend that much. You need to utilize your credit card to 1/3rd of its credit limit – ideally between 30-40%. 

 

Track your buying – Don’t spend on impulse purchases. Review your bills to see where the most amount of your spending happens and see if that can be cut down. Lastly don’t indulge more than you accounted for.  Try and look for deals and wait for the right time to spend. 

 

Set spending alerts – this will give you a heads-up when you are nearing your monthly spend threshold. It will prevent you from exceeding your planned spending. 

 

Other spending tips – Don’t shop if you are very sad or very happy. Hold back till you feel normal – extreme emotions result in liberal shopping choices. Use your credit card to buy things you require rather than buying things. This will avert you from buying things you don’t need, just because you have a credit limit to do so. 

 

Step 3: Have a good credit card payment strategy in place

To prevent your credit card bills from exploding and accruing high interest and finance charges on it, pay your bill on time. Automate your payments so you don’t forget the due dates and can avoid any penalties or late fees. This will assure that your credit card outstanding stays within controllable levels. 

 

While it is recommended to at least pay the minimum amount due, doing just that leads to the dues getting piled up and adding to your debt woes. Pay more than the minimum amount due, and then as and when there is an inflow of funds, keep freeing up the credit card balance due. The ideal way to prevent your credit score from getting tarnished and not incurring further penalties and interest charges is to pay timely credit card bills.

 

Step 4: Choose a credit card wisely 

 

Some of the best credit cards in India offer great benefits that reduce your expenses. They don’t charge annual fees and have a lot of cashback and reward points that offset the high amounts being spent. Do a detailed evaluation of credit cards before getting one. Credit cards have numerous benefits that can help save money. Figure out which one offers the most benefits and cashback on the expenses that you typically incur. This way you can be a little more carefree while spending. 

 

Once you have repaid the debt you can breathe a sigh of relief. However, one tends to get the urge to spend freely and binge spend when they have managed to control their bills and paid them on time. Don’t get back to the same disparaging behavior. Follow these tips at all times to keep your credit card bills in control. 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.