Question

Identify the ways in which credit can best be used.

Answer 1

1. Estimate the repaying capacity: At the beginning of the credit period estimate, the maximum amount of repayment capacity can be made at the end of the credit period. Make sure that all your purchases should fall within this repaying capacity. at any cost, expenses should not cross our income and repaying capacity.

2. Plan the purchases and regular bill payments at the beginning of the credit period: Better to plan the purchases at the beginning of the credit period cycle, hence you can avail the benefit of the maximum credit period. If you pay the full outstanding bill payments on or before the due date then you are used your credit period without interest and penalties.

3. Don't use your credit limit to the full extent: Maintain self-discipline in the usage of the credit limit, maintain 30% remaining credit in your card at any time, i.e, make a cap on usage of the credit limit to maximum 70%. This will be considered as the best discipline in the usage of credit.

4. Pay the whole outstanding bill on or before the due date: Plan the payment of outstanding bills on or before the due date, then your credit card will be good and you will be under the category of self-disciplined repayer.

5. Worst case scenario for non-payment of outstanding: As life is uncertain needs and emergencies may come any time, sometimes we may not be able to pay the full outstanding bill, in that case at least try to pay the minimum amount due on or before the due date. then you will be saved from the imposition of penalties, anyhow interest on the remaining unpaid balance has to be paid.

another way to reduce the interest expenses is, some service providers allow you to smart pay i.s EMI option, you can avail of this option to decrease the burden of interest expense.

6. Remember to monitor your activity: your spending pattern will have to be closely monitored by you, any avoidable purchases or payments can be reduced in the coming months.