How to use your credit card the right way and maximise rewards and waivers

Swiping your credit card regularly and making your bill payments on time demonstrates responsible credit management to lenders. This builds a positive credit history, which is crucial for securing higher credit limits on your existing cards or qualifying for attractive loans in the future, like mortgages or car loans. A good credit score can translate to increased spending limits on your credit card. This means more flexibility for larger purchases. Additionally, lenders view borrowers with strong credit scores as less risky, potentially offering them lower interest rates on loans.

BankBazaar offers a useful guide on how to use your card right, maximise your rewards, and ensure a rewarding credit card experience:

Being eligible:

These are the typical eligibility criteria from credit card-issuing banks

• Age Criteria: Primary applicants must be between 18 and 60 years old, while add-on card applicants must be at least 18 years old.
• Income Requirements: Applicants need to have a stable income, typically a minimum annual income of Rs 2.5 lakh to Rs 3 lakh, varying by bank.
• Credit History: A good credit history and a high credit score (750 or higher) significantly enhance the chances of getting approved for a credit card.
• Nationality: Applicants must be either Indian residents or Non-Resident Indians (NRIs), with some banks issuing cards only to Indian nationals.
• Employment Status: Stable employment, typically with a minimum tenure of one year, is essential for credit card eligibility.

Being credit-mature is as important as being credit-eligible:

Consistent Income:

• Do you have stable income to pay your credit card bills?
• Do you have savings to cover your payments in a financial setback?

Accountability:

• Can you track your credit card bills and pay them on time?
• Can you safeguard sensitive info like CVV and passwords?

Responsible Spending:

• Can you stick to a budget and not exceed your spending limit?
• Do you understand the card’s T&Cs, such as not letting friends and family use your card, or not using a personal card for business expenses?

Debt impact awareness:

• Do you understand how your card use impacts your credit score?
• Do you understand the charges, interest rates, and penalties?

Types of credit cards

Each credit card has its own unique offerings, reward structures, merchant offers, discounts, and charges. Find a card that aligns the best with your lifestyle in order to maximise its benefits. 

Where to buy when you don't have an income?

Pledge your FD: Existing fixed deposits can be used as collateral to get a credit card with a credit limit of up to 90% of your FD amount.You can continue to earn interest on your FD but if you fail to repay the bills, the bank adjusts the payment against the FD amount.

Add-on card:  Get your spouse or parents to apply for an addon card for you. The credit limit remains the same for the primary and secondary cardholders.Primary cardholder has to provide your ID and address proof details and is obliged to make the payments.

Activate your card within 30 days 

For security reasons, the RBI has mandated issuers that if the card is not activated by customer within 30 days of issuance, the issuers are liable to close any such credit card account within seven working days on receiving confirmation from the customer. To avoid cancellations, make sure you activate your card within the time limit and set your card limits.

“Card activation is straightforward and should be done in 30 days, else you risk having your card deactivated," said  Adhil Shetty CEO, BankBazaar.com.

Repay on time, and in full 

Understand your billing cycle so that you repay your bills on time. Billing cycle is the interval between closing dates of two consecutive bills. For instance, if your bill is generated on the 10th each month, then your bill cycle is usually from the 10th of one month to the 9th of the next. You can change your due date at least once. So, you can tell your issuer to modify your billing cycle such that the due date is around the 5th so that you can repay your bills after your salary is in.

How to use your credit card the right way?

Regular use of your credit card with timely bill payments enhances your credit history, leading to higher spending limits and attractive loan offers. Furthermore, using your card at least once a year is important to prevent the deactivation as per RBI’s rules. Apart from financial transactions, processes such as generation of statement, change of PIN, or change in transaction controls are also considered as uses that help keep the card active.

No-frills cards are designed to provide basic credit card benefits without requiring cardholders to pay a yearly fee, while premium cards offer elevated credit limits, enhanced reward points, and lifestyle perks but come with an annual renewal cost. In many cases, annual charges are waived off if your card spends exceed a certain threshold. Plan your card use such that you are able to derive maximum benefit from such offers but remember not go overboard just to earn more rewards.

Credit health 

A large part of using your credit card optimally is to use it responsibly. You can do this by checking your credit report regularly to understand your credit situation and flag discrepancies in your report. Stick to a credit utilisation ratio (CUR) of under 30% and avoid applying for multiple cards within a short duration. Most importantly, make sure you pay your credit card bills in full on time. Partial or delayed payments can lead to late payment fees and higher interest charges, both of which can impact your credit health.