People with new credit cards are thrilled with their decision to get one – the card offers a lot of leverage to buy expensive items and experiences, and it is a boon for those who are responsible with their money. But too much use can max out your card and land you in financial trouble.
Maximise your credit card features without maxing it out – here’s how:
- Use the available credit card offers to save money.
The best credit cards in Dubai offer a host of reward points, discounts on shopping and eating out, lounge offers, concierge services, and many other incentives for swiping the card. You accumulate points even for paying utility bills. Redeeming these credit card offers helps you save money by way of discounts and freebies.
- Be prompt with payments.
Credit card payment defaults are one of the top financial crimes in the UAE and the Middle East. Not paying your card bills on time is bad on several fronts – the bank flags you as a defaulter and notifies the country’s major credit bureaus. This automatically lowers your credit score. Meanwhile, your repayment history is being tracked month upon month, and a pattern of irregular payments can scupper your chances of getting institutional loans in the future. Missed payments also attract high interest and penalty fees. Instead of falling into the late payment trap, set up an automatic bill payment system with your bank to clear bills the moment they are issued.
- Know your credit limit and stay below it.
Though your credit limit is high, you should stay below it in terms of your monthly spends on the card. We recommend this because it keeps your credit utilisation ratio low and tells lenders that you are a responsible spender. The lower your credit utilisation ratio, the higher your credit score – but you have to be consistent about this. Do not use more than 40% of the ratio in any month to keep a lot of credit unused. If you do exceed this limit, be sure to pay your bill promptly the following month.
- Pay more than the minimum on the card.
Not only must you pay your credit card bills on time, but you must ensure that you pay more than the minimum amount. This keeps your account healthy, because you carry less balance to the next month when you pay more than the minimum amount. Do remember that the balance amount is charged interest, so it is in your best interests to keep it low.
- Report theft or loss at once.
There may be an unfortunate circumstance in which your credit card is misplaced or stolen from you. It may fall into the hands of miscreants who may try to misuse it. Report the loss or theft to your bank at once, so that the bank can deactivate it immediately and trace any future purchases or swipe attempts on the same card after you reported it. The best credit cards offer fraud liability, but this comes into play only when you report the loss or theft immediately.