Credit cards allow users to buy things now and pay for them later. Apart from providing instant access to credit, this financial tool comes with several other benefits like reward points, attractive deals, cashback, and ease of transaction. The key to enjoying the various benefits available with a credit card is to use it in a disciplined manner. Here we talk about some common mistakes that should be avoided while using your credit cards.
Only Paying the Minimum Amount
While you must always pay the minimum due amount on your credit card, it is advisable to pay the full due amount. Contrary to popular belief that paying the minimum due amount will not attract any charges, the outstanding credit card bill amount continues to accrue interest in the form of finance charges.
The only thing you save by paying the minimum amount is the late payment fee. So, if you are regularly paying only the minimum due amount, your outstanding dues will continue to pile up and attract finance charges leading you into a debt trap. Such situations can be avoided by planning your bigger expenses and their payments through credit cards well in advance.
Missing a Payment
Missing a due payment on your credit card can harm your credit scores if it remains due for a long period. Even if the payment is due for a shorter period, it will cost you in terms of penalty interest charges which in turn raises your APR or the annual percentage rate. You can avoid such situations by setting calendar reminders and notifications for all your online credit card payments.
Not Checking Your Statement
By not checking all the items listed in your credit statement you are ignoring the possibility of any kind of errors or frauds. However, if you review your monthly statement thoroughly, you can easily identify errors and take corrective action immediately. You can also keep a record of credit card transactions made by you during the month and match them with your statement.
Forgetting to Redeem Reward Points in Time
A major advantage of using credit cards is that you get rewarded for spending. These reward points can be exchanged for cashback or attractive offers and discounts at various stores. But in most cases, these reward points have an expiry date and hold no value after that. You can avoid such a situation by applying online for the best credit card whose reward points have no expiry or cap on them.
Withdrawing Cash Using a Credit Card
If you are withdrawing cash through your credit card, you must be paying hefty interest charges that apply from the day of the withdrawal till the date of its repayment. These charges are in addition to the one-time fee charged for every withdrawal. These charges can prove to be quite costly and can be avoided by applying for a credit card that offers interest-free cash advances.
You can enjoy the various benefits offered by credit cards by using them in a disciplined manner and avoiding certain common mistakes.