The Indian financial market has witnessed a drastic change in consumer credit and lending patterns in recent years. Short-term, unsecured credits have become increasingly popular, with financial tools like credit cards becoming one of the most preferred modes of alternate currency for many across the nation. Today, credit cards account for almost Rs. 54,235 Crore spent through various PoS terminals across the nation, a 29.6% increase within only one year.

This astonishing rise in popularity is primarily because of the number of features and benefits credit cards have to offer. These utilise a predetermined line of credit, instead of a cardholder’s savings, to pay for goods and services. Studies show that an increasing number of young professionals are learning how to use a credit card and utilising the same to pay for various necessities without affecting their savings.

Studies also show that a significant number of first-time borrowers are utilising credit cards to build a good financial history and to improve their credit rating. Using a credit card has a direct impact on the factors that influence one’s credit score which is why utilising a credit card regularly and responsively is considered as one of the quickest and most effective methods to build one’s credit.

However, like any other financial tool, there are certain aspects a borrower should take care of while using a line of credit. They should also know how to use a credit card in a manner that will help them with their score. So, let’s take a look at some of the guidelines for effective credit card use.

Practice timely repayments – One of the most crucial habits of using a credit card is to maintain a history of timely repayments. Payment history carries 35% weightage on an individual’s credit rating, so it is essential to repay the credit card dues in time in every billing cycle.

Financial experts also suggest repaying the total outstanding amount instead of the minimum due mentioned in the credit card statement. Paying only the minimum will carry over the remaining sum in next month’s billing cycle. It will also attract interest, accumulating into a larger amount and becoming difficult to repay. Continuous carry overs also leaves a negative impact on one’s credit history.

Maintain a low credit utilisation ratio – The second most important aspect of one’s credit report is the credit utilisation ratio, contributing to 30% of the total calculation. It is an important factor as it shows an individual’s credit dependency.

Credit bureaus like CIBIL will consider an individual credit-dependent if he/she regularly utilise a large portion of their allocated credit limit. Over time, it will negatively affect their score. Keeping one’s credit utilisation ratio lower than 30% will help them maintain a healthy balance and become financially responsible. It will also improve their CIBIL rating significantly.

Avoid using multiple cards – Owning multiple credit cards reflects poorly on one’s credit report. The total interest rate can reach a significantly higher amount, affecting one’s FOIR ratio and credit rating at the same time. It is preferred to use a single credit card that offers a wide range of features and benefits to cover all necessary financial requirements.

Cards like Bajaj Finserv RBL Bank SuperCard packs the features of different types of credit cards into one. It acts as a standard card, a loan card, EMI card, and a cash card, which makes it ideal for a wide range of everyday scenarios. 

They also bring pre-approved offers on credit cards, as well as several other unsecured and secured advances like personal loans, business loans, and home loans. Such offers make the process of availing a loan hassle-free and time-saving. You only have to share your name and contact details to check your pre-approved offer.

Keep older accounts – The length of one’s credit history account for 15% of one’s credit rating, which makes it beneficial to maintain an older credit card account instead of applying and availing a new one. Moreover, financial institutions are also likely to offer a higher line of credit, along with more benefits on an existing credit account.

Learning how to use a credit card and utilising it correctly is one of the most efficient and quick methods to build one’s credit score. Following these above mentioned methods will help an individual improve their rating and build an excellent financial history with the help of a credit card.