7 credit cards habits millennials should follow to avoid debt

Millennials have always been in the spotlight, whether it’s for disrupting industries or being tech savvy. Recently, their spending patterns have been under a spotlight. This is because millennials are less threatened by the idea of credit, according to Rajiv Anand, head of retail banking at Axis Bank. In fact, the total unsecured credit borrowed in India has increased to approximately Rs.6 lakh crore as of April 2018. 

Considering that most millennials are wage earners, their aspirations are also changing. Now, they’re more inclined to own a car or invest in the latest smartphone. They’re not afraid of getting into debt, especially if it’s for the right thing.   

According to an ICICI Lombard study, millennials are also spending a whopping 69% of their salaries each month. State Bank of India collected Rs.1,772 crore in 2017 just in penalties because most account holders haven’t maintained the minimum balance. 

Debt has also been dubbed the new working capital of this generation. With credit cards providing easy access to finances, it’s not impossible to sink in a pile of debt. It’s high time for millennials in India to be cautious of their spending patterns.  

If you’re struggling with your money and your credit card, here are some tips and tricks you should be aware of. 

  1. Spend within your limits

In this age of social media, you will be exposed to a whole new world of restaurant openings, new bars, and fancier experiences. It can be tempting to swipe your card at that new restaurant down the street or get drinks with your friends more than once a week. 

But you should be aware of your monthly income. If you’re spending a certain amount on your credit card, you should also have the finances to clear those bills the following month. Avoid going overboard to curate the perfect social media account and then creating debt for yourself. 

  1. Make your payments on time

Yes, you have read this on every platform. However, there’s a reason this needs to be ingrained. Once you start missing payments, it becomes a habit that’s difficult to quit. Missing payments can cause a lot more damage to your financial health, from bringing down your score to paying additional penalties. 

Set aside a certain amount each month to clear your dues. If you’re having trouble remembering dates, you can either set reminders or standing instructions so the amount get debited automatically. 

  1. Pay your dues in full

You open your credit card statement and you see two things—total amount due and minimum amount due. Now, you may be tempted to just pay the minimum amount and use the rest to visit a café or pick up a new pair of shoes. 

However, this shouldn’t be the case. To avoid debt, one of the first rules you should follow is paying your dues in full. The minute you start carrying a balance, you develop a habit to making the smallest payment possible.  

Not only will you end up paying additional interest, but you will also lose track of your finances altogether. This may throw off your monthly budget and you’ll be forced to restrict your expenditures to clear your debts. 

  1. Always check your credit limit

You’re on a shopping spree, swiping your card for a bunch of clothes and accessories. Next thing you know, you’ve maxed out your credit card. This is one situation you should aspire to never be in. Never take your credit limit for granted. If you don’t keep a track of your expenditures, chances are you will use all your available credit and then some more.  

Credit institutions charge over-limit fees when spend over the credit limit on your card. This also gets reported to credit bureaus, thereby, lowering your credit score. Before you decide to spend with your card, always check the limit. In fact, go to the extent of checking your card statement with a fine comb.  

  1. Use your debit card

It’s wise to use your debit card for your expenses because you’re dipping into your own savings. This will make you more prudent and financially sound. When you use your credit card, you tend to take the credit limit and the borrowed money for granted.  

A debit card will help you keep your finances in check. You’ll also learn to stay within your budget each month and avoid going overboard. 

  1. Taking advantage of EMIs for shopping

Lately, several brands have partnered with certain banks to offer a ‘0% EMI’ option for their customers. If you’re buying a new smart phone or another gadget, you may be tempted to use this option. However, do your research and see what the hidden charges are. Usually, the bank factors in the EMI with the total cost. So your monthly payments will include a certain percentage of interest, so proceed with caution. 

EMI options are now also available on flight ticket and hotel bookings made online on select websites using your credit card. So, if you’re planning your vacation, you can convert these expenses into EMIs as well. 

  1. Avoid cash advances

In an emergency, you may feel compelled to use the cash advance option on your credit card. However, you should steer clear away from this type of credit. For starters, cash advances attract a withdrawal fee, a processing fee, and high interest rates from the day you have taken the money. You will continue paying this interest till you have cleared your dues in full. If you don’t have the finances, try looking for other credit lines before you resort to cash advances. 

At the end of the day, you should learn to use your credit card responsibly. It’s important to know that your actions may affect you both in the long term and short term. Debt can be difficult to get rid of, so it’s best to be prudent with your spending patterns. If you are in debt, don’t hesitate to ask for help from family and friends. With the right strategy, you will never find yourself trying to clear outstanding balances month after month.