We all have made one or more common mistakes while using a credit card. A credit card is like a coin that has pros and cons. Using a credit card wisely is only going to bear some fruitful results for you. If you keep making mistakes while using your credit card then it will lead you to a debt trap. Hereunder are some of the common mistakes that a credit cardholder makes while using a credit card.
- Not taking the right credit card: This is the first and making a wrong decision can create a problematic situation for you. Not having a credit card that compliments your needs and spending pattern can put you at high risk of losing benefits and thereby increasing your expenses. You must identify your needs and spending habits first and then choose the card that fits them.
- Default in due payment: You can easily make this mistake as it is a human tendency to forget about things. You can forget the due date and that can subsequently lead to a default in credit card bill payment. This can have a negative impact on your credit score. To avoid this from happening you can register for the auto-debit services so that on the due date your bill is automatically debited from your account.
- Only paying the minimum amount: Another mistake that a credit cardholder generally makes is just paying the minimum due amount in order to avoid the interest charges. But that is not the case, by paying the minimum due amount you can only avoid the late payment charges and not the interest. You must pay more than the minimum due amount so that you do not feel burdened while paying the rest of the amount.
- Not maintaining a low credit utilization ratio: Using a complete credit card limit will only be going to affect your credit score. You should not have a high credit utilization ratio. Instead, you must maintain a ratio between 30% – 40% so that it can also help you in building a good credit score.
- Spending on unnecessary things: Credit cardholders also tend to make the mistake of using their credit card to pay for unnecessary transactions. When you know your credit card’s rewards program then you must use your credit card for those transactions only that let you earn reward points. If you are using your credit card for those transactions as well that you can pay through cash or are completely unnecessary, you are only increasing your credit utilization ratio which will have a negative impact on your credit card.
Using a credit card at ATMs: Mistakenly thinking that using a credit card to withdraw money from ATMs would not accrue charges like that of a Debit card. Then you are making the biggest mistake while using a credit card, you must know that this transaction attracts a processing fee. This will only increase your expenses. You must not use your credit card at ATMs until and unless there is an urgency of cash in hand.
Additional Reading: Do’s and Don’ts To Improve Your Credit Score