How to use credit cards wisely in various situations?

The increasing use of credit cards in recent times emphasizes the need to understand how to use them efficiently. It's crucial to realize that using a credit card wisely not only helps maintain good credit health but also makes it easier to handle payments when securing loans during financial emergencies.

Handling Emergencies: A survey revealed that planning for financial goals is a significant challenge for salaried Indians. Many participants expressed concerns about meeting medical expenses and repaying loans, especially credit card debt. It's essential to plan for emergencies like job loss, and medical expenses for yourself, your family, or elderly parents. Opt for health insurance with comprehensive coverage and predictable premiums instead of relying solely on credit cards, which come with high interest rates. If you do use credit cards for emergencies, be mindful of the card's APR, potential fees, and long-term consequences in case of non-payment. Credit cards can be a backup for unforeseen emergencies if used cautiously.

Travel Companion: Frequent travelers appreciate the convenience, global acceptance, and rewards that credit cards offer. However, be aware of foreign transaction fees, typically 1-3% of the transaction amount. These fees can add up and increase interest rates if the balance is not paid in full, making purchases more expensive in the long run. It is advisable to weigh the benefits of convenience of use over credit accrued when swiping your card.

Entertainment Spending: Credit cards are popular for entertainment expenses due to their ease of use and fraud protection. However, subscriptions with auto-renewals can lead to unplanned expenses. The convenience of online purchases may result in impulse buying and increased debt. When using credit cards for entertainment, monitor expenses, make timely payments, and be an informed user understanding the impact on credit scores and overall financial stability.

Overall Reminder: Relying on borrowed money in any form comes with its share of drawbacks. Always use your credit card wisely and responsibly, aligning your spending with your budget and financial goals.