Swipe wisely this Holi: 5 credit card habits that can boost your credit profile

As you plan your festive shopping and expenses this Holi, it's vital to recognise how your credit card can either brighten your financial future or leave behind difficult-to-clean financial stains. Do remember, credit cards are financial tools that can help you boost your financial prosperity, if used correctly.

These tools, i.e., credit cards, can help you earn rewards, cashback, and other offers, and build a solid repayment track record. They can also go a long way to help you boost your borrowing potential and creditworthiness. Keeping these important points in mind, here are five simple yet effective tips that can make these credit tools work for your well-being this Holi.

5 credit card strategies to boost your credit profile
 

I. Keep your spending in control

• Never exceed the 30% credit utilisation threshold. A very high credit utilisation is bound to complicate future borrowing and drag your credit score down. Even during euphoric times, such as festivals and celebrations, ensure that you keep your balances well below your permitted credit limit.
• Tempting discounts, family time and the thrill of festivities can force you to make an emotional decision. Such decisions can be costly in the long run and derail your budget. While using credit cards, always be responsible and spend only what you can comfortably repay in full. Avoid impulse splurges at all costs.

II. Pay smart, pay on time

• Pay all your pending dues on time, well before the due date. When you make on-time payments, this behaviour protects your credit score and helps you avoid unnecessary complications such as late fees, fines, and notices. The applicable interest rates on credit cards in such cases can escalate quickly, even exceeding 35-40% annually.
• Automate your repayments and keep the required balance in your accounts, so you never miss your upcoming payments. This will help you a lot in managing finances and building a neat credit profile without any missed due dates or defaults.

III. Track your credit health

• To accomplish this, you should review your credit card bills and statements diligently. Record any unauthorised transactions and discuss them with the relevant authorities. This way, you will be able to address any hidden charges or related complications early.
• It is your responsibility to review your credit report regularly. Such a focused approach will protect you from credit downgrades and allow you to promptly raise and address any inaccuracies or disputes to prevent credit damage.

IV. Plan big-ticket purchases wisely

• Utilise offers and services like no-cost EMI cautiously. Carefully plan and factor in processing fees, long-term ramifications and repayment loopholes to ensure that you don’t regret your decision later on, and holistically, such decisions do not decisively damage your long-term borrowing potential.
• Limit ongoing debt repayments and EMIs. As a rule, avoid borrowing beyond your means. Too many EMIs can easily strain your monthly salary or cash flows. As a simple rule, your total EMI payment should never be more than 20-25% of your monthly income. This will help you better manage your debt obligations.

V. Protect your credit card and data

• In the rush of festivities, do ensure that you avoid unsecured public Wi-Fi for making transactions. If possible, use only secure networks to make online payments and to clear payments by submitting your PIN or OTP. Any lapse here can result in unauthorised transactions and financial fraud.
• Always ensure you enable real-time transaction alerts. This means that any transaction you make should be notified to you via your official email address and SMS. This will keep you informed and give you time to react if any financial discrepancy or unauthorised transaction occurs with your credit card.

Keep in mind that credit cards are complex credit tools. They come with inherent risks. Risks such as unpaid balances snowballing into expensive debt due to compounding of interest. Legal complications in case the credit card holder defaults on payments, and decisive damage to credit profiles if mistakes are not rectified within the stipulated time.

That is why, before applying for a new card or enhancing your credit limit, you should always consider consulting a certified financial advisor to ensure your borrowing aligns with your long-term financial goals.

To apply for a credit card, visit here.

Disclaimer: MintMoney has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. MintMoney does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.