A new credit card user is recommended to use the card optimally. This can happen by avoiding to make certain common mistakes which credit card users often make. These include maxing out your card, missing payments, withdrawing cash, paying the minimum due and overlooking other charges. Here we list out the five key mistakes which credit card users often make.
Credit card users often make these 5 mistakes
I. Paying the minimum due: Interest rates on credit cards are typically quite high. So, paying only the minimum due is likely to keep you in debt longer and leads to massive interest charges. For example, if you have a total credit card bill of ₹one lakh, the minimum due could be ₹5,000-7,000.
So, it is not recomended to pay only the latter figure since this would accrue higher interest in the long run.
II. Missing payments: Even single payment can lead to late fees, and importantly, a negative impact on credit score, which may stay on your report for a long time.
III. Maxing out the credit limit: Using too much of credit (high utilisation ratio) hurts your credit score and can also lead to over-limit fees on some cards.
IV. Cash withdrawal: When you use a card for withdrawal, it comes with high fees and interest that starts to accrue immediately, without a grace period, thus making them one of the most expensive ways to access cash.
V. Overlooking fees and terms: The annual fees, foreign transaction fees, balance transfer fees, or hidden charges can offset a chunk of rewards that you earn. So, not knowing your card’s terms may cost you more than you gain.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
