Credit cards are a great financial instrument to fulfill most of our credit needs these days. From easy EMIs to a great number of reward points, they provide a wide array of benefits and utilities. But one has to take ample care of credit cards and use them correctly to avoid fines and penalties. Most of the Common Credit card mistakes can lead to bad credit and may also lead you towards credit card debt traps.
Below mentioned are some of the most common credit card mistakes to avoid:
1. Not paying bills on time: The utilities and benefits of a credit card come at a cost, including the joining cost, annual cost, interest rates, fines, penalties, etc. One of the most common credit card mistakes is procrastinating in paying bills on time. If you're more than 30 days late on a payment, it may drastically harm your Credit score.
2. Withdrawing cash from Credit Card: Withdrawing cash from a credit card is a costly affair purely because doing so will levy several charges over the cardholder like ATM fees, cash advance fees, etc., all this can make the withdrawal costly. Every year, these costs might range from 23 to 49%. Using your credit card to withdraw cash is not a good idea since it will result in significant Credit Card Hidden Charges. And if in case you are not able to pay these costs on time, they will continue to accumulate, leaving you in the danger of probable credit card debt trap and bad credit.
3. Not reviewing your Credit report periodically: A credit report is what tells us about our Credit score, whether it is good or bad, if there are any signs of error in the report, etc. It would be a big mistake to not keep an eye out on one’s credit report because it may lead to undetected errors and signs of bad credit.
4. Not reading the fine prints: Reading fine prints can help you get acquainted with the terms and conditions of the card, the reward program of the credit card, etc. which can help you make informed decisions and plan your spending strategically to maximize reward points for extra savings. On the other hand, not reading the prints may lead to ill-usage of credit cards that may lead to a bad credit score.
5. Applying for multiple credit cards at the same time: While it is acceptable to keep multiple credit cards, it is not advisable to go on applying for multiple credit cards with different organizations over a short period. Doing so will indicate the poor financial state of the individual and may hurt the CIBIL Score by many folds.
6. Not understanding your APR: The interest charged on your credit card account throughout a billing cycle is referred to as the APR. It can be the annual fee, Purchase APR, Balance transfer APR, Penalties APR, Cash advance APR, etc. each of these are equally important as the other. It is a general mistake to overlook these details but one should strictly refrain from making these mistakes by understanding the APR of their Credit card.
7. Not choosing the right credit card for yourself: It is very essential to do thorough research at the time of choosing a credit card to align the benefits of your new credit card with your spending habits. Not being able to compare credit cards thoroughly is one of the primary credit card mistakes that one can make. You should be informed about the rewards, redemption offers, fees, and charges, special collaboration, utilities, etc.
8. Only making the minimum payment: Although you should always try to make the minimum payment amount, still only paying merely the minimum required is not recommended. If you do not pay your account in full, you may find yourself in debt and incur extra interest costs. Plus, paying the bare minimum might add months, if not years, to the length of time it takes to pay off debt.