8 Major Credit Card Mistakes 🤦♂️
1. Making Late Payments
Making late payments will not only lead to paying higher interest (36% to 48% p.a.) and penalties but also impact your credit scores.
Make sure to set up payment reminders or set up an automated payment mechanism to avoid future consequences.
2. Making Minimum Payments Each Month
Making only minimum payments repeatedly can get into a debt trap and consequently, it will lead to making unnecessary interest payments until you re-pay the outstanding balance completely.
3. Failing to Check Monthly Statement
Rather than waiting until the end of the month to review a list of transactions, it is a good practice to check credit card activity on a regular basis to identify the unusual charges and any fraudulent activity on your card.
4. Withdrawing Cash from a Credit Card
This is the biggest mistake one should avoid. In addition to finance charges and cash advance fees, withdrawing cash will also attract a higher rate of interest (up to 42% p.a.). This amount is charged right from the day one withdraws cash until the date of repayment.
5. Keeping Credit Utilisation Ratio Above 30%
Credit utilization is one of the most important factors in determining your credit score. It’s important to maintain a low credit utilization rate below 30%.
6. Making Unnecessary Purchases
Avoid thinking of your credit card as free money. Keep in mind, you'll have to pay back everything you buy.
7. Waiting for Payment Due Date
Don't wait until the payment due date to make your credit card payment. This increases the risk of missing your payment due date. In addition, making early payment will also reduce your utilization ratio, which helps in improving credit rating.
8. Be Aware of The Rewards
Most of the credit card provides free access to the airport lounge, hotel meals, and other benefits. To make the most of them, you need to look up the reward program and keep yourself updated.