Credit Cards come with many benefits that can make our life much easier financially. Be it completing your bucket list or any emergency in life – our credit card has been there with us in every situation, making it super convenient for us. But there’s always a flip side to it. Most of us who are new to the world of credit cards don’t know how to use them wisely and in learning, we tend to do some big mistakes. So here we will tell you some common credit card mistakes that should be avoided once you own a card.
1.Continuing with the previous balance
We know that credit cards come with comparatively higher interest rate than other loans. So the wiser thought would be to not carry the previous outstanding bill to the next month. You would end up with an extremely high interest rate amount over the time which will leave you in a debt trap.
Try paying the amount in full every time you receive your credit card statement. It will not only help you clear your payments but will also keep your credit score stable.
2.Paying your credit card bill late
Another golden rule for all the credit card users: always pay your credit card bill on time. When you pay your bills late because of any reason, there are two main things that will happen. Firstly, you will end up paying a lot more than you expected. The card issuers will start putting a late payment fee along with other charges and in that process, you will end up paying much more than what you ideally should have.
Secondly, this could affect your credit score negatively. Any late payment from your credit card will harm your credit score which will damage your financial life. Once your credit score is affected, you can have major qualifying issues for all your future financial decisions, be it any new loan or credit card that you apply for in the future.
3. Not aware of your card’s benefits
Some credit cards are packed with perks and privileges which we might not even know about. Certain credit cards come with student benefits, some come with rewards or cashback advantages and some of them are best suited for daily use.
While some card issuers will tell the benefits on their website or while advertising, there might be another set of advantages that would be hidden. So, have a word with your credit card issuer while going for any credit card, know the benefits your card holds before you lose out on the major rewards.
Suggested Read: What happens when you don’t use your credit card
4.Making minimum payments
In every credit card bill statement, we have two options of either paying the bill in minimum due amount or to pay in full. It may be super convenient to pay your credit card bill in half but it may also lead to a higher interest rate. These high interest rates that are charged by the credit card company will only keep your credit card bill growing every month, making it extremely difficult for you to clear the debt pile. The wise thing to follow here is to pay the credit card bill amount in full – always.
Using your credit card for making minimum payments turns out to be a common mistake done by people. To avoid any extra charges on your monthly bill, always pay your credit card bills in full amount.
5.Maxing out your credit card
Maxing out credit card essentially means that you have reached your credit limit and that now you do not have any additional credit on that credit card. This situation where you do not have any credit left on any of your credit card accounts can turn out to be extremely harmful.
Maxing out a credit card has negative consequences on your credit score too. Once your credit score is affected negatively, chances are that the lenders might be hesitant in the future on seeing that you cannot handle high debt. It is advisable you create a proper financial spending plan listing out the important expenditures that you cannot miss out and needless to say, avoid new debt as much as possible.
6.Not keeping a check on your credit card statement
Most of us don’t take out the time to go through the credit card bill and pay the amount as it is. However, one must check the monthly credit card statements in order to ensure that one hasn’t been charged over something they didn’t purchase. This will also help you to know where to stop and control the unnecessary spending with your credit card.
7. Not utilizing your reward points before the expiry
Most credit cards come with some great deals on reward points. These reward points indeed are tempting as they offer deals on hotel, travel, airport lounges and movie tickets. The reward points come with a certain expiry date which is usually 2-3 years from the date of purchasing the credit card.
You can even redeem the reward points in the form of air miles or gift vouchers. So make sure you make full use of these reward points with every purchase you make, it will add to your list of benefits.
8. Applying for new credit cards to pay off your debt
Another mistake that most people tend to make is they apply for a new credit card and pay off the previous debt with the new one. While this may seem like a convenient option, on the contrary, this can have some serious repercussion.
If you ever face this sort of financial crunch, the best thing to do perhaps is you clear off the previous debt that has been piling up and only then apply for a new credit card. This way you will clear your debt and not pay anything extra to the credit card lenders.
The more you have an idea about your credit card, the fewer mistakes you would avoid. The issue is when we don’t have much knowledge about how our credit card works and the benefits it offers. So whenever you opt for any credit card, it is important you understand all the terms and conditions that come with it, you talk to your credit card lender freely before you make any big spending from your credit card. The key rule that applies to the credit card is one should know how to use them responsibly and only then can you enjoy the privileges that come with them.