Credit cards are highly beneficial products that financial institutions provide to their customers. But using the credit card unwisely can lead to a huge toll on finances. Whether you choose the wrong card or fail to pay the EMI on time, you will accumulate lots of interest in your head. That’s why you must know every aspect of using a credit card to safeguard yourself from falling into the web of unending debts.
Here we have mentioned 5 common credit card mistakes that the users to avoid.
5 Common Mistakes to Avoid While Choosing Credit Card
Here are the common mistakes that you must avoid while using credit cards to keep your finances secure:
1. Don’t Choose the Wrong Credit Card
Various types of credit cards are available with diverse fees, interest rates, and facilitates. Find out your need to apply for an instant credit card and choose the one that fulfills your needs and provides you with lucrative rewards. Always select the credit card that aligns with your financial goals and balance the expenditures and rewards.
Start by analyzing your spending habits, making a budget, checking your CIBIL, and then applying for a credit card. A reward can be beneficial to you if you can pay the monthly balance. In case you carry monthly debt, you must choose the cards with 0% intro APRs and balance transfer.
2. Don’t miss Credit Card Payments
Missing the credit card bill payments can lead to penalties and lower your CIBIL. It’s recommended to set up the auto debit option which will deduct the payment from your account automatically every month and you will never miss the due date.
If you think you don’t have enough amount to pay the bills any month, make sure to contact your credit card company, they might waive the charges. In case you are unable to afford the payments, contact the company, they will provide you the counselors who can help you in the right direction.
3. Avoid Making only Minimum Amounts
It may sound amazing to pay only the minimum balance but it can lead to huge costs later. The minimum payment usually goes toward the interest and your principal amount remains the same. This will prolong your debt and lead to more and more interest amount. If your balance is less than 1 lakh, you must make fixed amount payments every month to pay off the amount within a year. However, if the amount is more than 1 lakh, you can fix the payments that cover the interest and principal until you become free from debt.
4. Never Take Cash Advances and Spend Unnecessarily
It attracts users to convert their credit card balance into cash during any emergency, but they forget the high interest rates and fees associated with it. Interest rates on cash advances are always higher than the direct purchases. The company will also charge the advance fees at a flat rate or some percentage of the amount. You will not get the interest-free grace period which leads to quick debt buildup.
5. Don’t Overspend
When you have a credit card in your hand, you never give a second thought before purchasing what you like. The impulsive purchases you make using your credit card are the main reason for your ever-increasing debts. Make a budget and stick to it to avoid impulsive shopping. Constantly monitor your credit card and detect the extra charges. Keep the credit card for planned and more necessary purchases. Adopt the habit of smart credit card purchases and you will see yourself out of debt soon.
Conclusion
If you handle your card inappropriately in terms of expenditures and repayments, you will be in a web of debts. Make sure to keep in mind the common mistakes that you must not make while using the credit card and then plan your purchase. Owning a credit card is important in today’s time but make sure to don’t overburden yourself with EMIs and debts.
