The ICICI credit card is the best instrument to finance your instant cash requirements in an emergency. It allows you to purchase merchandise and services on credit and pay for them later on.
There are several advantages of using a credit card, which is as follows:
You earn reward points on all your purchases. Reward points can be redeemed at select partner stores.
You get attractive cashback and discounts which helps in reducing the cost of your purchases.
Credit card offers interest-free period. If you pay all your bills on time before the due date, no interest is charged on it.
Credit card offers you instant loans in case of emergency.
A credit card is the best alternative to cash, it saves you from the need of carrying cash everywhere.
Judicious use of credit card helps in building the credit score.
Along with several advantages discussed above, there are some disadvantages too like credit carries the highest interest rate in comparison to any other type of loan. If you miss your bill payments, you have to pay interest on the entire outstanding amount. Keeping in mind the benefits and disadvantages of using a credit card, let’s discuss how often should you use your credit card:
Credit Utilization Ratio
Many credit card experts suggest keeping your credit card utilization ratio low, only up to 30 percent of the credit limit or below. This is because credit utilization is an important factor affecting your credit score. Keeping credit utilization only up to 30 percent helps in having a good credit score. Also, low credit utilization means lower credit card bills, hence, less debt burden and easy to pay.
Timely Bill Payments
If you are using a credit card, it is very important that you pay all your bills on time. To maintain a good credit score, timely repayment of dues is of great importance. Though few people have some misconceptions regarding it. They feel they can carry their debt from one month to another by paying only the minimum due. Though this is correct that paying minimum dues will not affect your credit score but you will have to pay heavy interest on the outstanding amount. This debt will keep accumulating till fully repaid and will increase your stress. Timely repayment keeps you debt free and stress-free.
Avoid Cash Withdrawals at ATM
In order to keep your interest payments low, it is advised that never use a credit card for cash withdrawals at ATM, as you have to pay a hefty interest on it from the day you withdraw it to till the time you repay it. This is because interest is calculated on daily basis on the cash withdrawn using a credit card. As already discussed credit card carries an astonishingly high rate of interest in comparison to other loans, you should not use it at ATMs.
Choose Reward Points as per Your Spending Patterns
Credit card offers a host of benefits mentioned above to its users and reward points is one of them. You earn reward points on all your purchases made using a credit card. It is pertinent that you choose a credit card based upon your spending pattern, as otherwise, you won’t be able to redeem reward points. Like if you travel less a credit card which offers reward points on traveling is of no use to you. You can instead look for a credit card which offers reward points on shopping or dining etc. Always select a credit card in which benefits outweigh costs.
Additional Reading: – Questions to ask before getting a credit card!
The above points will surely help in maximizing the benefits and optimum utilization of credit card.