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Rediff.com  » Getahead » 4 smart hacks to use your credit card in the New Year

4 smart hacks to use your credit card in the New Year

By Rajiv Raj
January 01, 2016 12:59 IST
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Credit cards can be a blessing or bane for your CIBIL score depending upon how you are using them. If you are a compulsive credit card user and are at a loss about how to regulate your credit card spend, here is help at hand!

When used judiciously, your credit card can help you build up your CIBIL score. On the other hand, reckless use and failure to repay the outstanding amount on time can bring your CIBIL score crashing down. You probably know all of this in spirit, but are really struggling because you have no idea how to regulate credit card spending.

If this is the kind of situation you find yourself in, let the following tips serve as a guide on how to spend less on your credit card.

1. Segregate your purchases

If you have realised that you are spending way too much on your credit card, it is time for some introspection. Bring out a past few credit card bills and make a note of what are the purchases you have made on your card. Now think about the areas where you could have used your debit card or cash instead of your credit card.

Things like groceries, small items of daily use etc. should be bought using the debit card or cash. This also holds true for entertainment areas such as game zones for kids and cinemas or entertainment parks for the family.

Now look at the rest of things that you are using your credit card regularly for. If this comprises things like dining out ever so often, or items of luxury or even toys for the kids, it needs to be stopped right away. If you cannot afford to do these things with the cash you have in hand, you can't afford them at all!

2. Check out a card with the best fee structure

The fee on your credit card, is one of the most important considerations you should make while checking out a credit card in the first place. There are a lot of card offers that will tell you about attractive reward points and cashbacks and will even entice you with a "zero annual fee" in the first year, but what they do not tell you is that there is indeed an annual fee along with the service tax component that you need to pay from the second year onwards.

There are however a lot of cards that carry no annual fees that you can opt for. Of course there will be no benefits such as benefits and a tonne of reward points, but at the end of the day, it is a sure shot way of reducing your expenses on your credit card.

3. Be on the hunt for cards with better rates of interest

The credit card market in India is pretty competitive, with credit card issuers trying to lure customers with attractive offers. This is probably the reason you receive a lot of offers in the form of direct mailers from credit card companies every second day.

Instead of trashing them always, take the time to check out every once in a while if there is any interest rate reduction that a new card is offering. You can also compare the interest rates of the competitive card issuers and maybe consider a balance transfer if the rate is really good and worth the move.

You could also negotiate with your current credit card issuer and check out if a reduction in the interest rates is possible.

4. Negotiate with your card issuer

If you are having a problem re-paying your credit card debt, do not be in denial of it. Take time out to go to a branch and discuss your problems in repaying the outstanding amount with your bank.

More often than not a relationship manager is more than willing to see where your problems really are and may help you out in working out a plausible solution that works best for both you as well as the bank.

For instance, your bank could move up the payment date to coincide with the day your salary is credited to your account, so that there is an immediate ECS payment, or it can even consider waiving off the late payment fee and other penalties if any.

Whatever may be the case, it is worth your while to give this a shot, instead of just letting your credit card debt balloon and get out of hand.

Your credit card debt can be a major influencer on your CIBIL score, so it is imperative to keep it under check at all time. The first things you should know about using a credit card is that you should never purchase anything on it that you cannot purchase in cash.

The other ground rule is to make all outstanding payments in full within the billing cycle of a credit card at all times.

Just following these tips and being a little cautious about your credit card spend will ensure that your CIBIL score remains high and there are no blemishes on your CIBIL report.

Photograph: Marina del Castell/Creative Commons

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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Rajiv Raj