Credit card etiquette – a prerequisite for being in good financial shape

Credit cards have become a part of everyone’s life. Since the launch of the first Visa card in India in 1981, people are getting used to the ease of a single swipe and are enjoying the unlimited benefits of making a cashless transaction. Used wisely, they can solve a number of financial problems that might otherwise seem difficult. Therefore, a solid knowledge of credit card etiquette is immensely helpful.

Some of the etiquette rules to follow are outlined below:

Planning: one should be aware of one’s fixed cash inflow and outflow. In a typically ideal situation, if the total profit is 45,000 and the fixed expenses (covering basic needs) are 25,000, the miscellaneous expenses should be planned in such a way that they do not increase by a predefined fixed percentage of the remaining amount.

Miscellaneous expenses <= X% * (Fixed income - Fixed expenses)

Savings = Fixed Profit – (Fixed Expenses + Miscellaneous Expenses)

Estimation: In many situations we tend to increase the budget and spend without thinking about the consequences. It is not a cause for concern if you have this card, as it solves the immediate financial need. But you have to be careful enough to be able to repay the amount you have used in a couple of months. It is helpful to make a list of all expenses and group them into priority levels.

Tools: A simple Excel sheet can do wonders when planning your expenses. Keeping a daily expense sheet controls your spending habit. There are various online expense management trackers and managers that can help you manage money effectively.

Self-discipline: This is the most important factor to consider. This is necessary in order to control your wishes and therefore the list of expenses. If you are self-disciplined, you will not be easily seduced by the countless interesting offers.

With the above tips, one should be able to live a financially well-planned life. These can prevent one from getting into a deep financial set and these tips can prevent an individual from falling for the lures of these cards. Improper use can lead to a situation of financial instability from which one cannot recover. Having a well-planned financial budget and calendar for each month not only organizes your financial life, but also instills the habit of being well organized in all spheres. These cards have become a part of everyone’s life, but they must be used with care and diligence.