When Not to Use a Credit Card?

Credit Cards are the most popular financial products in India at present. Almost everyone has Credit Cards, others who don’t have it want one. Most of the banks and other financial institutions offer the facility to Apply for a Credit Card Online, making it easier for you to buy it.
If used judiciously, Credit Cards offer you numerous benefits, but it is seldom the case with most of the people. Most of the times, you end up swiping our card for even the smallest purchases and do not pay attention towards repayment in full. This is a sure recipe for disaster which is sure to bury you under enormous Credit Card debts.
So, you must be careful and think at least twice before you flash your Credit Card, the next time you are making a purchase either online or offline. That fancy cashback offer on your card might sound great, but you might end up paying more than you would be able to save. You will also find various lists online which suggest multiple ways to maximize the benefits from your Credit Cards. You must remember Credit Cards have been designed to facilitate spending not savings.
Here we have prepared a guide as to when you should not use a Credit Card. Just exercise a little caution and consider this as a guide to manage your card debts:

  • When you need cash urgently: You should not use your Credit Card for cash withdrawals. No matter how urgent your need is, avoid making cash withdrawals on cards, instead purchase anything you need from a store and pay with your card. When you make cash withdrawals against your Credit Card, not only do you incur significant charges, you also end up reducing your credit score significantly, affecting your eligibility for availing loans when in need. Your card issuer may also lower your credit limit if you make frequent cash withdrawals.
  • When you are travelling to abroad: You should not use your card while you are in a foreign country. If you use it for making payment in a foreign currency, you end up paying huge transaction charges, currency conversion charges, and numerous other charges. Instead, you should get an international Credit Card or prepaid forex card as they do not have such high facilitation charges.
  • When you can pay with Cash: You should not use your Credit Card for every small purchase when you could instead have paid cash. It should be used only when you are facing a temporary cash crunch and will be able to pay the bill in full after a fixed date (when you get your salary). Otherwise, you don’t realise how quickly the Credit Card debt adds up and you end up paying exorbitant interest charges.
  • When the seller charges a transaction fee: You should not use your card when the seller charges a swiping/transaction fee against payments. This might not seem much when the transaction amount is low but adds up to a significant amount when the transaction charge is more. In such scenarios use your debit cards or cash instead.
  • When your financial position is a bit shaky: This might sound like stupid advice but believe us you should not use your Credit Card to make purchases when your financial situation is a bit unstable. In such scenarios, you might not be able to pay your card bills in full and end up paying exorbitant interest charges which you, in fact, cannot afford. It would be wise to delay your purchases till your financial situation improves and you are able to honour payment deadlines.
  • When you are planning to apply for a loan: As a rule of thumb, you should remember that you should not use more than 30% of your card limit when you are considering applying for a loan. Lenders will consider you irresponsible if you are not able to pay your Credit Card bills on time and this may affect your eligibility for a loan. So, think twice before using your card when you are going to apply for a loan.
  • When you have no idea about the available limit: Banks charge very exorbitantly over usage charges when you spend more than the sanctioned limit of a Credit Card and it affects your credit score negatively as well. So, when you have used up around 80% limit of your Credit Card, you should keep it aside and do not use it for at least a few months till you manage to free up some limit.

Credit Cards are not that bad as you may think, just a little caution and discipline from your side can make sure that you have all your Credit Card liabilities under control.
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