It is undoubtedly a smart move if you can survive without a credit card. However, there are many households and individuals that use credit cards even for daily usage.
If you are aware of the nuances of the payment of credit card and how to use a card so that you don’t have to pay late fees and fine, you can go ahead and continue using one. But many individuals are not aware of pitfalls and use their credit cards only to fall into a debt trap.
Given below are few common mistakes that usually the first time users of credit cards make. Let us find out how you can avoid making these errors.
- Avoid making just the minimum payment
You will come across many cardholders that just make the minimum payment for their credit card expenses. However, this can cause your interest payments to pile up and eventually you might have to shell out a fortune as interest payments.
As such, it is best to pay off as much as possible whenever you receive a bill statement for your credit card. Do not postpone credit card payments.
- Credit limits
Every credit cardholder is assigned a credit limit and although the credit card company would like you to exceed the limit, in your best interest, you should never exceed it. This is because although, your credit card will not be blocked and you will be allowed to use the card at any POS (Point of Sale) but if you exceed the limit, it will cost you dearly.
- Withdrawing cash with card
As long as you are using the credit card for making purchases and you are paying off the bill at the earliest, the interest your card is attracting should not be a cause of concern. However, the moment you withdraw cash with the card from any ATM outlet, you will be charged a certain percentage on the amount that you draw from the outlet. This can be as high as 3% on the amount you draw if not more. Aside from this, your card will attract so called APR or Annual Percentage Rate, which can be as high as 28% the moment you receive the cash from the machine.
- Credit card debt
Many cardholders fail to make the credit card debt payments on time. A number of balance transfer cards are available. These cards usually do not attract any interest rate but for a specified period of time beyond which you have to shell out interest payment for nonpayment of credit card debt.
As such, if you have opted for a balance transfer card, make sure you make the payments within the time that attracts no interest. Moreover, it will also ensure that your credit report gets the accurate scores if you manage to pay off debts wisely.
- Ignorance is not bliss
Majority of the cardholders do not check their expenses with credit cards. The situation is somewhat similar to availing instant payday loans and not bothering to pay up sooner. It is a wise move if you check your monthly credit card bill statements and find out how frequently you are using the card.
Apart from that majority of the card holders are not even aware of the rate of interest that their credit cards attract.
Such ignorance is not called for and can ruin your reputation as being financially irresponsible can reflect in your credit report. Instead use the card to make your payments and “spread out purchases” that are worthwhile.
Last but not the least, regardless of the purpose you are using the card for, always keep in mind that your financial report card is your credit report and the more responsible you are financially, the better it is.