10 credit card mistakes to avoid

Posted by Bhavna Singhal on June 26th, 2018

Using a credit card is an art. If used efficiently, you can enjoy great financial rewards and benefits from the card. If not, be prepared to face heavy financial charges and a bad credit score. An Online Credit Card is not only an instrument for financial transactions, but also a tool to enjoy rewards and benefits. Many often than not, credit cardholders misunderstand the card features and end up using their credit card inefficiently. They, as a result, make grave financial mistakes.

Here are 10 of the most common mistakes which cardholders make and which should be avoided at all costs –

1. Choosing the wrong card

How many of you buy a card which suits your spending pattern? Not many. Most of you buy a credit card without assessing whether the card is suitable for your usage or not. As a result, you lose out on the benefits promised or fail to get the benefits you would want. There are different types of credit cards in the market. When choosing a card, you should always choose a card which matches your spending pattern. For instance, choose shopping cards if you frequently shop with the card or travel cards if you frequently book travel tickets using your credit card.

2. Opting for too many cards

Multiple cards can be chosen if they fulfil specific requirements and give additional rewards. However, you should be careful about choosing too many. If you have too many cards, managing them and paying their dues on time can be difficult and in the long run may end up having a negative impact on your credit score.

3. Splurging

Since your credit card allows you credit, most of you are tempted to binge shop. This is a serious mistake. Though you can pay the bills later, there would be charges involved. Moreover, you can also harm your budget through splurging. So, spend only what you can afford even if the card allows you credit.

4. Paying only the minimum amount due

Credit cards allow you to pay a minimum portion of the bill amount and carry forward the outstanding to the next billing cycles. As good as this revolving credit facility sounds, it should be avoided at all costs. Paying only the minimum amount due results in interest charges from the next cycle. These charges are quite high and might lead you into a debt trap. So, always settle the credit card bill in full. If you do intend to use the credit facility, look for better options like converting your credit card purchases into credit card EMIs.

5. Paying late

Another common mistake is paying the bills late. Delayed payment results in late payment charges and may hamper your credit score. So, credit card bills should always be paid on time.

6. Ignoring the monthly statement

You get a credit card statement every month which states the record of transactions and the outstanding amount. Most of you tend to ignore it. Don’t. The statement, besides giving you the financial information, also helps in tracking your spending. Use it to monitor your expenses and also ensure that all recorded transactions are genuine and mistake free

7. Not reporting a lost card immediately

In case of a loss or theft of the credit card, it is always advisable to report the loss to the credit card company. Ignoring to do so might result in huge financial losses due to credit card fraud.

8. Deferring the accumulated rewards

You get reward points in your credit card every time you use it. These points, when accumulated, give you rewards in cash or kind. However, the reward points have an expiry date. If you defer encashing your rewards, they might lapse. So, track and use your credit card rewards before their expiry to maximise your credit card benefits.

9. Making cash withdrawals

Credit cards allow cash withdrawals from ATMs and also allow emergency cash advance. However, in both these cases, an interest or fee is charged which is substantial. It is therefore, always better to avoid cash withdrawals using a credit card.

10. Letting the card get charged off

Do you what happens when you do not pay the card dues in time for consecutive months? You card eventually gets charged off and is terminated. This charging off of the card is bad. It seriously affects your credit score and damages it. Try and pay your credit card dues and avoid this charging off.

Avoid these disastrous credit card mistakes. Use the card effectively after understanding the terms and conditions and the associated charges. You would be financially rewarded.