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Credit cards have become an essential tool in today’s financial landscape, offering convenience and flexibility. However, inappropriate use of credit cards can negatively affect your financial health, especially your credit score. Overspending your balance is one of the most common mistakes cardholders make.
Stick to 10-15 per cent of your credit limit
Experts recommended using only 10-15 per cent of your total credit limit to maintain a good credit score. Spending more than 30 per cent of your credit limit each month can negatively affect your credit score. For example, if your credit limit is Rs 1.5 lakh, aim to keep your debt below Rs 45,000 to ensure that your credit score remains intact.
Why is a credit limit policy important?
While credit cards make it easier to pay for shopping, utilities, rent and education, they also increase the risk of falling into a debt trap. Many people use their credit cards to make large transactions or transfer money to their accounts. When it comes due, they often rely on personal loans to clear the balance, hurting their credit scores. A low credit score can cause difficulties in obtaining credit or making important financial decisions in the future.
How to avoid credit card debt
Limit usage: Use only 10-15 per cent of your loan limit per month to avoid overuse.
Monitor your credit score: Check your credit score regularly to know about your financial health.
Activate an old credit card: Maintaining an old credit card can have a positive impact on your credit score due to a long credit history.
Avoid emotional spending: Use your credit card only for necessary expenses and avoid immediate purchases.
By following these tips, you can avoid financial stress and keep your credit score healthy. Using a credit card responsibly ensures long-term financial stability and avoids debt-related issues. Always make informed decisions while leveraging the benefits of your credit card.
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