Credit Card Tips| North Loop Official Blog
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20 Dec 2020

Credit Card Tips

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Credit Cards are a line of credit that allows holders to make credit purchases at their convenience. In exchange for credit, cardholders repay the same in the form of installments in the future with an accumulated interest. In addition to this, several credit card providers offer a wide range of rewards such as airport lounge access, discounts on online shopping, cashbacks, etc.

However, as convenient as credit cards sound, the other side of the coin is that they can attract a lot of potential debt too. It is absolutely vital to plan your expenses wisely before finding yourself in a debt trap or a financial predicament. A credit card used wisely can help you build your credibility and your credit score, which help you secure better loans at lower interest rates in the future.

Here are a couple of credit card tips to help you make the most of your credit card-

Be aware of your monthly debt repayments-

Expert financial advisors suggest that your debts should sum up to a maximum of a third of your income. In case your debts are more than a third of your income, you should consider paying off high installment loans or reduce your credit card expenditure. The installments for loans could include education loans, car loans, etc. Ensure that you plan your repayments in such a way that it doesn’t affect any of your long term goals, such as retirement savings.

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Keep a tab on your CIBIL reports-

A CIBIL score is a detailed report of your creditworthiness, which is used by lenders at the time of providing loans. A good CIBIL score or credit score implies that you are eligible for loans at attractive interest rates, with the flexibility to repay the same over long periods of time.

A CIBIL report has information regarding how many lines of credit are active, how much loan you have availed of so far, how much is outstanding, etc. Everything pertaining to your credit and repayment history is found on your CIBIL report, and a score is awarded based on your creditworthiness (between 300 - 900). A score above 700 is considered good, and people with this score are eligible for almost all types of loans.

You also need to keep a tab on your credit report, as any errors or discrepancies can lead to a lower credit score. In case there are any errors on your report, you have to raise the same immediately.

Repay on time and think twice about closing inactive lines of credit-

Most banks and NBFCs require customers to pay installments on the 5th of every month, so ensure that you repay your installments on or before the due date. You not only avoid late fees and other charges, but your CIBIL scores also improve when you make timely payments. Also, ensure that your debt levels are low and all inactive accounts and credit lines are active as lenders look at a long credit history before lending money. Shorter credit history can mean riskier money lending.

Go through all policy agreements and T&Cs-

These long documents have a lot of information that you may miss, such as annual fees, balance transfer charges, etc. These documents also contain a long list of reward programs available with the card, which cardholders can make the most out of spending a stipulated amount. Make sure you go through all documents and you’re aware of all the charges and rewards before going ahead with the credit card.

In case you prefer to pay off your entire card balance the succeeding month, look for credit cards with better rewards programs. Or, in case you want to repay your card bill over a set of installments, look for credit cards with lower interest rates.

Use your cards cautiously-

Keep a tab on your credit card statements to avoid any fraudulent transactions on your card. Credit cards have a lot of risks associated with them, so ensure that your credit card information is kept safe with you at all times. Do not reveal your credit card information and any One Time Passwords of your card to anyone. In case you notice any unauthorized or fraudulent transactions on your card, make sure to report it to your card issuer at the earliest.

Repay Debts Strategically-

Financial advisors suggest that all high-interest debts such as credit card bills need to be paid on priority, while you make minimum payments on other debts. Use your lines of credit, especially your credit card wisely, and ensure that you only borrow what you can repay without affecting your financial goals. Create a proper financial plan, and make sure that you repay off all your debts as early as possible to ensure that your long term financial goals are on track.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.