Five credit card mistakes you should avoid

Business

04 Jan 2019

#FinancialBytes: 5 mistakes to avoid while using credit cards

Today, credit cards have become an essential part of our lives because of the convenience they offer.

Credit cards are used for almost everything nowadays and these cards can also help people earn rewards and save money when used responsibly.

However, if not handled well, credit cards can also become a huge burden.

Here are 5 mistakes to avoid while using credit cards.

#1

Having too many credit cards can make things worse

Having too many credit cards can make things worse

Credit cards are very useful but having too many of these cards, simply for the attractive offers and rewards, can be risky.

Having more credit cards means more expenditure and higher debt. The annual/renewal charges for each card also increases the expenditure.

While credit cards can boost the credit score, maintaining too many cards could be a hassle that can affect the credit score.

#2

Paying 'only' the minimum due amount every month

Another common credit card mistake one must avoid is paying only the minimum due amount every month.

One must understand that paying just the minimum does not really decrease their debt or outstanding balance; banks would continue to charge high interest on the entire outstanding amount.

So, instead of paying the minimum amount, one must clear as much of the outstanding amount as possible.

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#3

Defaulting on bill payment and high credit utilization

Defaulting on bill payment and high credit utilization

Defaulting on credit card bill payments or not paying them before the due date is one of the biggest mistakes cardholders must avoid.

This will not only reduce their credit score but also decrease their chances of getting bigger loans like car loans or housing loans.

Also, high usage of credit card limit results in high credit utilization ratio that impacts the credit score.

#4

Withdrawing cash using credit card should be avoided

One should also avoid using their credit card to withdraw cash from ATMs. The credit card issuers consider these cash withdrawals as "cash advances" - like short-term loans.

These cash withdrawals can attract a high-interest rate and banks also charge a percentage of the amount withdrawn as transaction fees.

So, people should use their debit cards for cash withdrawals instead of credit cards.

#5: Don't ignore monthly statement or blindly pay the bill

Many people tend to ignore their monthly credit card statement and blindly pay the bill. However, one must check the statements to ensure they aren't charged for something they didn't buy. This will also help them know how much they owe and control their expenditure.

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Most asked questions

What is credit utilization ratio?

How to save money using my credit card?

Do Indian banks offer credit cards to someone with no income?

Can you suggest some credit cards for earning good rewards points?

More questions

What is credit utilization ratio?

Asked 2019-01-04 20:46:08 by Saanvi Singhal

Answered by NewsBytes

Credit utilization ratio can be defined as the percentage of a cardholder's total available credit which is currently being used. Credit reporting agencies use this ratio while calculating an individual's credit score. Higher credit utilization ratio indicates the borrower's credit hungry behavior, which adversely impacts the credit score.

How to save money using my credit card?

Asked 2019-01-04 20:46:08 by Dhruv Sarin

Answered by NewsBytes

Credit cards can help you save money and earn rewards. Here's how: Avail discounts, deals, and cashback offers to save money using credit cards. Save on fuel purchases through fuel surcharge waivers or reward points. Avail travel offers, restaurant deals, and free movie tickets. Earn reward points for transactions and redeem them. Avail No-cost EMI and flexible EMI offers.

Do Indian banks offer credit cards to someone with no income?

Asked 2019-01-04 20:46:08 by Trishla Chatterjee

Answered by NewsBytes

In India, some banks issue credit cards to individuals with zero income against fixed deposits and strong savings accounts. Some options include: Axis Bank Insta Easy Credit Card, SBI Card Unnati, ICICI Bank Instant Platinum Credit Card, and Kotak Mahindra Bank's Aqua Gold Credit Card.

Can you suggest some credit cards for earning good rewards points?

Asked 2019-01-04 20:46:08 by Aadhya Shah

Answered by NewsBytes

In India, some credit cards offering good reward points and other benefits include: Standard Chartered Platinum Rewards Credit Card, SBI SimplyCLICK Advantage Credit Card, YES FIRST Preferred Credit Card, HDFC Diners ClubMiles Credit Card, and Citi Rewards Credit Card.

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