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Credit cards offer convenience and valuable financial benefits, yet many users remain uncertain about how they really work. Complex reward systems, managing monthly payments, and deciding if having more than one credit card is beneficial often lead to confusion. Clear answers to five common credit card questions will simplify your understanding, helping you make smarter financial decisions and effectively maximise your credit card rewards.
What Are Credit Card Rewards and How Do They Work
Credit card rewards are benefits you earn every time you use your credit card. Common rewards include cashback, airline miles, or reward points you can spend later. How much you earn depends on how often and where you use your card.
For instance, some cards give you higher credit card rewards for fuel purchases, groceries, or online shopping. If your card offers 1% cashback, spending ₹1,000 earns you ₹10. Later, you can redeem your reward points to save on travel, get shopping discounts, or reduce your monthly bill.
Each time you use your card, you receive a credit card receipt, a small slip with crucial transaction details. Learning how to read this receipt properly helps you keep track of your spending and catch any mistakes or unusual charges quickly. A typical credit card receipt includes:
Merchant Name: Clearly states where you made the purchase
Transaction Date and Time: Shows exactly when the purchase happened
Amount Paid: Displays the total amount, including taxes or additional charges
Transaction ID: A unique reference number used to identify the payment easily
When reviewing your monthly statement, match each listed transaction to your saved receipts or transaction alerts. Payments or refunds credited to your account will be marked clearly with a ‘Cr’ next to the amount. Keeping receipts organised helps you manage your finances securely and confidently.
Here is how having more than one credit card can improve financial flexibility, enhance rewards, and simplify payments when managed responsibly:
Use different cards to earn specific rewards such as cashback on groceries or air miles for travel, optimising benefits from everyday spending.
If your primary card is declined or lost, having another card ensures uninterrupted payments, providing security in unexpected situations.
Assigning specific cards to different expense categories helps you clearly track your spending habits and maintain greater financial discipline.
Owning multiple cards boosts your overall available credit, providing greater flexibility for larger purchases or managing unexpected financial emergencies.
Spreading expenses across multiple cards can keep balances low on each, positively impacting your credit score by reducing credit utilisation.
Different credit cards offer unique perks like airport lounge access or exclusive shopping discounts, letting you enjoy specialised benefits from each card.
If you don't pay your full credit card balance, several negative things can happen. You may face late fees and high interest charges, increasing your debt. This can also harm your credit score, making future loans harder to get.
Here’s what happens based on how long you delay your credit card payment:
Delayed by 30 Days: A single delayed payment might slightly impact your credit score, but repeated delays can lower it significantly
Delayed by 60 Days: Your credit score will noticeably drop, and this delayed payment will appear clearly on your credit report
Delayed by 90 Days: At this stage, your credit score suffers badly, and your card issuer may label your account as a Non-Performing Asset (NPA)
Delayed by 120 Days: Your credit score drops severely, the account status shows as ‘collection,’ and this information stays in your credit history long-term
Here is how to easily select a credit card that matches your spending style and helps you save money:
Choose a card with credit card rewards like cashback or travel points based on your most frequent spending categories.
Pick a card with lower interest rates if you think you may sometimes carry a balance beyond the payment due date.
Select cards with low or no annual fees to ensure the rewards and benefits outweigh any costs you might incur.
Apply for cards designed for your credit score range to increase your chances of approval and avoid unnecessary credit inquiries.
Opt for more than one credit card if additional perks, like lounge access or special discounts, match your personal preferences and lifestyle.
If you regularly travel abroad or make international purchases, select a card offering minimal or no extra charges for foreign transactions.
Select cards offering longer grace periods, allowing more time to repay your balance after receiving your credit card receipt, without incurring interest charges.
Here is how to make the most of your credit card benefits and get maximum value from your spending:
Always choose the card offering the highest rewards for each category of spending, like groceries, fuel, or travel expenses.
Clear your monthly balance completely to avoid interest charges that can cancel out the rewards and benefits earned.
Regularly redeem your points or cashback to enjoy your rewards before they expire or lose value.
Watch for limited-time promotions that boost your rewards or offer discounts on shopping, dining, or travel.
Spend within your limits, even if the rewards seem attractive, to avoid unnecessary debt and interest charges.
Here is how you can easily avoid common credit card mistakes and keep your finances healthy:
Pay Bills on Time: Always make timely payments to avoid late fees and damage to your credit score
Avoid Minimum Payments: Pay more than the minimum amount due each month to reduce interest charges and clear debt faster
Manage Multiple Cards Carefully: If you have more than one credit card, track spending closely to avoid confusion and overspending
Understand Your Card’s Terms: Know your card’s interest rates, fees, and reward structures clearly to prevent surprises
Monitor Your Statements: Regularly check statements to identify errors or unauthorised charges quickly and correct them
Limit New Card Applications: Only apply for new cards if necessary, as multiple applications in a short time can hurt your credit score
Here is how to easily track your credit card statements and avoid any unwanted surprises on your monthly bill:
Review Statements Monthly: Carefully check your credit card statement every month to spot errors or unexpected charges
Use Mobile Banking Apps: Track spending instantly through your bank’s app, helping you quickly notice unusual or incorrect charges
Match Receipts to Statements: Regularly compare each credit card receipt to your monthly statement to confirm all charges are correct
Set Spending Alerts: Enable text or email alerts for every transaction, so you’re instantly aware of all spending
Store Statements Safely: Keep digital or physical copies of statements organised for easy reference in case of disputes
Consider the annual fees, interest rates, reward programmes like credit card rewards, your credit limit, and eligibility criteria. Checking these carefully ensures your card matches your spending needs and financial goals, avoiding unnecessary charges or application rejections.
Pay your balance fully each month, track spending through your credit card receipt, maximise credit card rewards, keep your credit usage below 30%, and always understand your card’s fees and charges clearly to avoid financial issues.
The 2-3-4 rule recommends having no more than two credit cards, waiting three months between applications, and maintaining credit utilisation below 40%. This strategy simplifies management and helps build a strong credit history over time.
The biggest issue with credit cards is high-interest debt due to overspending and late payments. Without careful management, cardholders can quickly accumulate debt, leading to financial stress, lower credit scores, and difficulty obtaining future loans.
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| 1min read
Posted on 16 May
Roshani Ballal
Academy by Bajaj Markets
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