Credit cards are popular and for a number of reasons. They come with a host of benefits beyond just easy access to credit during lean times. From maximising the value of your spends to offering freebies and special discounts that little piece of plastic can work wonders when used smartly.
However, it’s important you have complete clarity not just on the many benefits your card might offer but also the cost of availing them.
Here are a few credit card-related errors that you need to avoid:
1. Credit cardholders end up investing more as compared to their reimbursement capacity. Specialists recommend when utilising credit cards one should only purchase things that one needs and spend what one will be able to pay off completely at the conclusion of that month.
2. A cash advance fee is charged for cash transactions like a cash withdrawal from an ATM using the credit card. As it warrants the highest interest rate, you should also avoid cash withdrawal on your credit cards. As cash advances start attracting interest immediately and not after the billing date, if you need to withdraw cash in an emergency repay it at as early as possible.
3. If you are using your credit cards overseas, banks levy extra charges on it. For international transactions, charges like cross-currency charges are also included, which make credit cards more expensive.
4. Most people miss the due date of credit card payment; always make sure to pay the full amount within the due date. With late payment, you will also have to pay a late fee, along with the interest. You can schedule payments through online banking or pre-pay your credit card bill.
5. One of the silly mistakes done by the card users is that they pay only minimum amount due every month. Users should not keep revolving their due payment by making minimum payment on the credit card. Along with late payment fee, this would attract high-interest rates. Paying only the minimum payment due should be strictly avoided, according to the experts. You would land in a debt trap and that may be very difficult to get out if you pay only the minimum due payment. To avoid the late fees, repay your card dues on time. You can pay the due amount within the due date this way and you will avoid additional late payment fees and interest.
6. The rollover of credit draws in the highest charges. The remaining sum after the minimum due amount gets rolled over to another billing cycle and attracts charges after.
7. For the most part, credit cards charge around 3.5 per cent per month on the average daily balance strategy, which turns out to be 42 per cent annually.
8. Depending on an individual’s income and credit history, all credit cards come with a maximum spending limit. Your credit score will also take a beating if you use your credit card to the maximum permissible limit repeatedly. With this, it will affect your ability to borrow in the future.
9. Try to avoid using multiple credit cards which can lead you to over- spending. Subsequently, attempt to have a limited number of cards, which can assist you manage your expenses.
10. Most people don’t know that if they use credit card properly they can earn reward points and can earn cash back. However, you should also not indulge in excessive spending just to earn cash back and reward points.
