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Managing A Credit Card On A Low Income

Nishant Lama

Remember that this little piece of plastic will work wonders in building your Credit Score (if managed properly). You may well be in a good position to secure bigger loans in the future (Car Loan, Home Loan), thanks to your Credit Card. Just remember the following:

Need – Yes! Want – No!

Impulse buying using a Credit Card when your limit is low is nothing less than a sin? Tell us something. How’re you going to pay back?

You can indulge in all these nonsensical sprees a few years down the line when you have money to pay up for being stupid. You can call it an impulse buy or whatever you wish. Being stupid is fine as long as you can afford it and do not end up in debt.

Many people are yet to recover from being reckless at the start of their careers. Do you know what they did? They compensated for their low salaries by swiping left and right. You will not do it, okay? Good!
Use Less

If your salary is low, it’s obvious that the credit limit on your card will be low as well. In this case, it’s even more difficult to resist temptation and not max out your limit. DON’T!

Never utilise more than 30% of your credit limit. It isn’t a widely-known fact that going beyond 30% of the credit limit on your card adversely affects your Credit Score. It shows too much reliability on credit. You might think it’s fine to ‘go nuts’ as long as you stay within the limit. It isn’t, really.

Make small purchases and pay it off before the due date. Better still, make these small purchases only in case of an emergency. Practise safe credit habits. Use cash when you can.

Mark The Due Date

We’ll assume that you understand how Credit Cards work. If you don’t and still applied for one, then you’re special. Most likely, you’ll mess this up.

To begin with, we’d like you to understand the importance of the due date. Yes, there is one important date that shows up on your statement every month. You need to pay any outstanding dues (we recommend full payment) on your card by this day, every month.

Is it okay to miss the payment? IT IS NOT! A missed payment will show up on your Credit Report (and not in a good way). As you advance in your career and start earning more, wouldn’t you like to secure bigger loans? This due date will play a very critical role for that to happen.

Set a million reminders if you must, but do not miss a payment. Also, you can request for an upgrade in the limit as you start earning more. If you’ve missed payments and ask for an upgrade, do you know what the bank will say? “No can do, amigo”.

I shall use my card to earn reward points. Wait, what?

Reward points are nice, really. In fact, it’s one of the nicest benefits of a Credit Card. You shop with your card, you earn points and then you shop some more. Very nice, yes? NO! That works out great only for cards with a high credit limit. If you’ve been reading this carefully, you’ve been advised not to use more than 30% of your credit limit.

Let’s say you have a credit limit of Rs. 30,000 which is likely if your income is low. Even if you spend Rs. 9,000 on it, the points you earn will be very less. Almost insignificant. You can’t possibly do anything nice with those measly points. And what if you actually spent that money just to get points? Look in the mirror and repeat, “You’re a fool”.

Okay, get real and take it slow. Things will get better and eventually you’ll be eligible for a card with a high limit. Shop then and earn some solid points. It’ll all make sense, then. For now, you’re just going to have to fight all your fake-shopper instincts. Cool?

Interest

Last but certainly not the least is something that is fundamental to owning a Credit Card. How much interest are you paying on your card? For basic cards with low limits, this is higher than other gold or platinum cards. Accepting any interest rate just so you can have a Credit Card is mind-numbing stupidity. You can still explore your options and go with the bank that offers you the best interest rate.

Also, take a gander at the annual fee? Every hard-earned rupee counts. No harm in tightening your purse strings especially when your pay cheque isn’t large. A time will come when you can go for any Credit Card you want. You’ll have to work for it, but it’ll happen. Till then, Scrooge up. Bless you!

So, what have we learnt today? We’ve learnt that being stupid is never an option. We’ve also learnt that a Credit Card is not a toy.

BankBazaar.com is India’s leading online marketplace for loans, credit cards, and more.