A credit card offers many shopping, lifestyle, entertainment, and travel benefits, helping you save and earn more. However, as a new credit card holder, you may be unaware of its working, which may lead you into debt.

Knowing how to use a credit card correctly can help you avoid it andmanage your daily finances. You must understand various related terms related to a credit card to maximiseits benefits. We’ve discussed a few of them in the article below.

1. Types of credit cards

Banks and financial institutions offer many types of credit cards. Choosing the right credit card that aligns with your expense trend is crucial. A credit card with shopping benefits must be prioritised if you are an avid shopper. Similarly, if you are a frequent traveller, you should opt for a travel benefits credit card.Research online and choose the credit card that suits your financial requirements.

2. Understand credit card terms and conditions

Before getting your first credit card, you must review the issuer’s terms and conditions. You can use your card correctly and avoid penalties by reading between the fine lines.

3. Get acquainted with various credit card terms

New card users may find numerous technical terms related to credit cards. It is imperative to understand these terms to make the most of your credit card. Some important terms related to credit cards include:

• Annual charges –The credit card issuer charges a membership fee annually to provide credit card services. Several cards come without a yearly charge, and you can choose them according to your suitability.
• Credit limit – Credit card limit is the maximum funds you can spend using your credit card. Each credit card has its credit and borrowing limits. Choose a card that matches your spending volume.
• Finance charges – When you purchase a product using a credit card, the card issuer provides an option to convert your purchase into EMIs. It is usually between 2 to 4% depending on the credit card. IDFC FIRST Bank offers the lowest finance charges starting at just 0.75% per month, depending on the credit card type. In addition, you also get several credit cards without an annual membership fee.
• Due date – Due date is the date before which you must pay your card bills to avoid any finance charges or late fees. If you pay your credit card bills in full before the due date, you don’t have to pay any interest on the spent amount.
• Grace period – The period between the last billing date and the due date is known as the grace period. Every bank offers a grace period on their credit card, which can range between 25 to 50 days, depending on the credit card. If you pay your outstanding bills in full during the grace period, no interest is charged on your spending.

4. Know how to use your card responsibly

Using your card responsibly can maximise its benefits and help you avoid any charges. There are a few things that you can do to amplify your benefits:

• Use less than 40% of your credit card limit to build a good credit score.
• Always pay your bills before the due date. You can also convert them into EMIs.
• Always pay your outstanding amounts in full.
• Check and verify your credit card statement every month.

5. Check for pre-approvals

Before applying for a credit card, check your pre-approval or qualification, as it helps you compare various options and choose the best credit card per your requirements. Also, you do not need to provide paperworkas the credit card issuer already has your details.

Once you know all the above factors, you are ready to explore and apply for a credit card that suits you and enjoy the perks and benefits of your expenses.