7 Common Credit Card Mistakes To Avoid

Being disciplined and smart about using your credit card goes a long way in avoiding these common mistakes associated with using them.

Owning a credit card can be a boon when you do not have readily available cash to pay for a product or service. But with this convenience, comes a responsibility. For the credit card debt you have gained, you must pay it back in full come the next pay cycle. The inability to do so will incurs fees that will accumulate the longer your full payment is delayed.

Paying for stuff with a credit card tricks our mind into thinking we are not spending much till we take for granted that money was spent is inconsequential since another swipe is “surely okay”. Many have fallen into the trap of spending too much only to find out that they do not have the means to repay their credit card bills.

Here some some of the most common mistakes that you should avoid when owning a credit card.

#1. Only Paying the Monthly Minimum

Every month, when the credit card bill arrives, there is an option of either paying it in full, or just paying the minimum due amount. In almost every case, paying in full is the correct choice. Paying only the minimum means there is still some outstanding balance on your bill (i.e. full amount owed minus monthly minimum paid) that will still be incur charges.

These charges can accumulate over time, and the outstanding balance will also accrue interest if you continue to pay the minimum amount month over month. Over a period of time, you can end up with a debt too deep to dig out off.

To avoid this problem, always plan on paying your credit card bill in full. Plan on getting the payment done as soon as possible if circumstance warrant paying the minimum amount.

If you happen to find yourself deeply in credit card debt or any debt which is no longer manageable, do consult with a licensed financial planner on the best possible way to exit from this situation as soon as you can.

#2. Missing a Payment

This is the mistake that banks are hoping you would do. If you missed payment for a cycle, you will most likely be charged with a hefty late payment fee. This would usually be a percentage of that month’s bill, scaling to the amount owed.

Missing a payment due to forgetfulness can be resolved by making a recurring reminder to pay your credit card bill each month. Some banks offer autopayment services that would make payments to your credit card every month.

If there are circumstances which prevent you from making the payment, consult with either the bank or a financial planner on how to move forward.

Note that there might be additional terms that your credit card might impose on you for not making punctual payments, and this segues to the next point.

#3. Not Knowing Credit Card T&C

Assuming that all credit cards have the same terms and conditions is a big mistake you should avoid. Different cards have different usages and are issued by different banks, thus they will have their unique sets of terms and fees. You do not want to be accruing some hidden fee that would later get charged to your bill if you can avoid it in the first place.

It is dreary read to get up to speed on a credit card’s terms, but doing so can help you avoid all of the above and more. Consult with the bank on the terms that you are unsure of, as they might be able to explain certain terms with more clarity.

There are plenty of online databases to refer to and help you make a better decision if you are figuring out the terms of different credit cards before applying for one.

#4. Paying for a Credit Card You Don’t Use or Hardly Use

Having a collection of credit cards, including supplementary cards, was once rather common as people want to take advantage of different benefits each card offers. However, in this day and age, having multiple cards can mean a whole lot of fees and service tax charges to maintain them.

Additionally, having too many cards can be hard to carry around. Spreading around your expenses between multiple cards can also make it hard to control your spending.

It would be better to consolidate and keep only a select few that are the most useful to you and your household. By doing so, you can keep track of your cards easier and reduce the chance of overlooking a payment or not realizing if a card goes missing.

#5. Not Reporting a Lost Credit Card

Some mishaps are unavoidable. When you lose a credit card, or if it was stolen for you, the immediate step following that is to call the bank and stop all future transactions from those cards.

Perhaps you feel embarrassed over misplacing a credit card. Perhaps you are occupied dealing with the loss of other personal belongings. However the case, it should not prevent you from reporting the lost of a card. Identity theft, exposed bank account details, or even robbery can be prevented by reporting as soon as possible.

The fees can come with replacing a lost credit card is minor when compared to the risk of being the target of a criminal activity.

#6. Chasing for Rewards or Not Redeeming Them

The rewards that you earn from using your credit card can come in the form of points or rebates. Some cards offer additional services at a reduced fee. The intention is to tempt you into using your credit card more and more.

So choose the card that suits your lifestyle, and offer you the convenience of earning rewards as you spend normally. Think of how that card would help you in the long run instead of chasing for the rewards that it offers.

After that, remember to set reminders to redeem these rewards before their expiry dates. Expiry dates are usually stated in your bank statement.

#7. Not Reviewing Your Bills

Conclusion

Always be mindful when using your credit card for any transactions. It is a tool that can cause harm if not used wisely, causing financial hardship and burden for some. Take your time to understand the ins and outs of your card, and that it doesn’t control you instead.

What mistakes have you done in the past concerning the use of credit cards? Let us know in the comments down below.