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    How to save Money through Judicious Usage of Credit Cards?

    Saving money through calculated and planned credit card use is immensely important if you want to keep yourself at a good distance from the limbo of debt. Credit cards have always been known to drive people into merciless debt if their usage falls out of gear. In fact, saving money by effectively planning usage of credit is perhaps the only way you can prevent yourself from getting buried under the debt stack. As a credit card customer, by following some prudent measures, you can definitely certainly keep your debt at acceptable levels and maintain your financial stability. Let us look at how you can save money through planned, prudent and calculated credit card usage.

    Related Read: Credit Card Mistakes that you should never make

    Using not more than 30% of your Credit Limit

    Banks usually provide you with a line of credit that corresponds to two or three times your monthly income. It certainly goes without saying that such a provision exists so that customers are given the opportunity to make maximum use of credit provided. Moreover, greater the expenditure on the card, greater the interest that has to be paid. Knowing that this is how credit cards work, it is essential to make sure that you use your credit wisely. More so, interest earned on credit cards is a crucial source of income for banks.

    Using about 30% of the allotted credit limit is also advised if you have to maintain a good credit score. Credit companies look at the extent of your credit usage against the limit provided and don’t rate you too well if you use too much of your credit. Moreover, using the entire credit limit is not going to help you in stabilising and consolidating your finances.

    As long as you make sure that you use not more than 30% of your credit limit, you can keep yourself from falling into the dangerous debt pit.

    Multiple Credit Cards

    Having multiple credit cards can be dangerous if you use them without prudent planning. More than number of cards being the actual problem, it is the combined credit limit you enjoy. This can psychologically work against you, making you overspend or splurge on a string of items or services. However, using multiple credit cards wisely is known to have a positive impact on your credit score. Again, it is important to use not more than 30% of the total allotted credit limit on all your cards.

    Also, overspending on one card is not recommended if you wish to save money by wisely using credit. If you’ve overspent on one card, converting your balance into flexible monthly payments is a good way to reduce your debt. However, while paying the monthly instalment payments on one particular card, make sure you don’t overuse any of the other cards you have.

    Spending not more than 30% of your monthly income

    Having a stable monthly income will always entice you into spending heavily on your credit card. If you want to safely and effectively manage your debt, you must make sure that you spend not more than 30% of your monthly income in a given month.  One of the dominant reasons why people end up falling into too much debt is that they end up spending 50 or 60% of their monthly income on their credit card. This can work against you considering the many other financial commitments that already exist in a given calendar month.

    Making Payments on time

    A rather unaware aspect of credit cards is the hidden charges that are levied. Customers end up paying hundreds of dollars in hidden charges every year and they can certainly be prevented. One of these types of charges is the late payment fee. If you delay your monthly minimum payment, a late payment fee is imposed and is usually about 5% of the minimum monthly payment. The minimum monthly payment is about 3% of the monthly outstanding balance and also includes pending payments from previous minimum payments and applicable interest charges. Besides late payment fees, overlimit fees and increased rate of interest due to defaults are other types of hidden payments that can be avoided by making sure you make your payments on time and not exceeding your permissible credit limit.  

    Knowing the Details of your own Credit Card

    Some customers don’t take the effort to find out the details of their credit card including the interest charges levied per annum, the annual fee, charges on cash advances and more. Taking out time to choose the right credit card that fits your budget on various parameters is also essential if you have to save money using credit cards.

    Learn: How to choose the right credit card in Singapore?

    Cash Withdrawals

    Using your credit card for cash withdrawals is a straight NO. As tempting as it can get, using your card to withdraw cash when you go broke can lead to fairly serious debt consequences. Things can go completely off hand if it develops into a habit. Cash withdrawals attract cash handling charges of about 6% of the withdrawn amount along with interest charges at the rate of 26% to 30% per annum. The interest is levied on at a compounding rate on an everyday basis until the amount is repaid in full. So if you were to make a withdrawal using your card you’d be paying a lot more towards interest, considering the interest that is already levied on the purchases and payments you make.  

    By following these simple yet practically demanding steps, you can save money on your credit card and avoid paying a lot more than what you’d have originally paid. Calculated usage of credit is presumably one of the most essential requisites to keep debt in control and lead a life unbound by the shackles of heavy, unforgiving debt.  

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