Credit Card Mistakes to Avoid: Learn Ways to Save Money

A credit card is a crucial financial instrument in today’s day and age. Their use has skyrocketed in the last few decades because they offer convenience, attractive offers, and security. But a credit card, like any other tool, can prove to be costly if not used properly. There are certain credit card mistakes to avoid especially if you have multiple cards and use them for everything from rent to paying for groceries. Furthermore, these mistakes can compound into debt which can cost you a great deal of money. Read further to get tips to avoid credit card mistakes so you can have a smooth experience.

7 Credit Card Mistakes to Avoid

A credit card is a wonderful tool that needs to be used properly or it ends up tightening the debt noose around your neck. Here are the crucial credit card mistakes to avoid:

1. Forgetting Due Dates

The importance of paying bills on time is self-evident. Not only do you pay a late fee if you miss the deadline but also damages your credit score.

2. Relying Only on Minimum Payments

It is hard to resist the temptation of paying just the minimum amount due each month but it is a trap. It is no secret that credit card interest rates are notoriously high. Hence, it will take a long time to pay off your balance.

3. Crossing Your Credit Limit

We are aware that it is normal to swipe mindlessly when you have a credit card but debt tends to compound when we are not paying attention. You should avoid maxing out your card because it increases your credit utilisation ratio and affects your credit score.

4. Ignoring Documents

We know it is not fun to read the fine print but it is an absolute must. The terms include important details like interest rates, annual fees, and rewards. Furthermore, we often forget to review credit card statements which results in hidden charges going unchallenged.

5. Applying for Multiple Cards

A hard inquiry on your credit report lowers your credit score temporarily. A bank performs it every time you apply for a new credit card, especially in a short period.

6. Picking the Wrong Card

Every issuer offers a variety of credit cards with different use cases. It is imperative to pick a card after doing thorough research on different types of credit cards and their perks.

7. Withdrawing Cash

Using your credit card to withdraw cash is rarely a good idea. You end up paying through the nose in the form of high fees and interest rates. It also results in a lapse of your grace period as your new transactions accrue interest right away. It is, thus, best to avoid them altogether, unless in case of emergencies.

ALSO READ: What Is Credit Card Grace Period and How Does It Work?

Tips to Avoid Credit Card Mistakes

You can protect yourself by following these useful tips to avoid credit card mistakes.

1. Pay on Time

There are ways in which you can set up automatic payments to ensure that you never miss a due date. It negatively impacts your credit score and results in hefty fines.

2. Settle Your Balance in Full

It is always prudent to pay the entire bill amount every month. It is the only way to avoid the cycle of debt you face when you pay only a minimum amount.

3. Read Your Documents

You need to check your statements regularly so you are aware of the charges on your card. It will give you an idea about any fraudulent charges or errors. It is also useful to read the terms and conditions so you know things such as annual fees, late fees, and foreign transaction charges.

4. Track Your Spending

It is necessary to set a budget for your spending and stick to it. Many budgeting apps track your spending so use them to chart a plan. One Credit Card app, for example, gives you the option to track everything in one place in a streamliner manner.

5. Prioritise Security

The security of a credit card is extremely crucial. Always ensure that you do not share your credit card details with anyone. Do exercise caution while using your credit card online by using a secure connection. Report any lost or stolen cards immediately.

A credit card can be a great addition to your wallet that brings perks like discounts and cashback. But it is important to use it in a way that does not drain your bank account.