5 Common Credit Card Mistakes You Should Avoid

You walk into a grocery store, pick up some bread and a jar of jam, go to the billing counter, swipe your credit card, and leave the store with your items. The entire procedure was simple, and it required only a couple of minutes. Here, you don’t need to stress about your bank balance, and there’s a good chance that you’ve earned some credit points while paying.

You don’t need to visit the bank for a loan and elaborate on the reason for borrowing the credit. Rather, you could use your credit card to purchase and pay whenever you wish. A credit card has changed the purchasing patterns of people and they can now purchase goods by using credit on demand. You might have credit cards from various banks, and it is normal for anybody to use a card for purchasing products or services.

Almost all banks and financial institutions provide different kinds of credit cards. They can be used for payment at places that provide you with goods or other amenities.

While credit cards are great, their inappropriate use can be devastating for your financial health. Most people aren’t even aware of these mistakes and it’s costing them big bucks. Some of the most common credit card mistakes are listed below.

1. Maxing Out the Credit Card Limit

Firstly, you should realize that you are the only person who’s in control of your expenditure. If you are someone who uses a credit card on a regular basis, then you should use it with discipline. Why? Because you can forget to keep tabs on your credit card expenditure, as that cash isn’t in your bank account and you can reimburse it later. That is an erroneous mindset and needs to be fixed as it can lead to much more expenses later on.

One more simple method for overspending is pursuing rewards. Procuring rewards is about getting bonuses while you do your regular shopping. In any other case, you’re not actually gaining anything. For instance, if you typically have an expenditure of $500 per month on your card and it earns you 1% in rewards, you get $5 in bonuses. But if you increase that expenditure to $1000, you’ll get $10, which, obviously, is an astounding $10 more, but on the other hand, you’re spending $500 more than you typically do.

2. Ignorance of Hidden Charges

All credit card companies intrigue ingenious people with zero interest credit cards and overwhelm them with rewards and bonuses. Having various credit cards is considered fancy, especially among youngsters. But almost all young people forget to ponder the question, “Are credit cards really free?”

In some cases, credit cards may charge no fees. Sometimes, the credit card may be free for the initial year, but there are yearly renewal charges afterward. They might be free for life if the individual is willing to spend a huge amount of money annually. Prior to using a credit card in a shop, we must acknowledge that many cards have up to a 2.5% surcharge. The various types of charges that regularly apply are yearly renewal charges, late payment charges, handling expenses for EMI, surcharges, cash withdrawal charges, etc.

3. Overlooking the Interest Rates on Credit Cards

One of the prime mistakes that a lot of us make with credit cards is that it seems like free cash. Using that card doesn’t hurt by any means and feels like there is always more cash to spend. It is important to understand that the sum you put on a credit card is really a credit from your future self, at a higher interest rate.

Another catch that accompanies “free money” is the gradual increase in your balance as you spend and as the interest compounds. To stay away from this, it is smart to use a credit card for purchases that you’re already planning on making so that you can back up the purchase with the money in your bank account. Along with this, you should opt for a credit card that suits your spending habits.

4. Making Minimum Payments

Credit card companies set extremely low payments. They benefit when you pay just the minimum amount required, as the amount would only take care of the interest costs. You’ll be paying on your balance for a really long time, gaining little traction in paying off your credit card debt. Over the long haul, you can wind up paying a huge amount of indispensable interest charges.

To keep away from this, pay more than the minimum on a monthly basis. Preferably, the best thing to do is to take care of your whole balance when you get your statement, so you never wind up owing any interest. If that is a bit too much for you, pay as much as you can with every payment so you can cut your balance. This will indeed help you avoid debt traps that have the potential to burn your hard-earned money due to high-interest rates.

5. Not Keeping a Track of Your Financial Health

When it becomes stressful to think about bills and debt, it can be easy to ignore the statement details or email notifications when bills are ready. Over time, this leads to greater stress, hurried decisions when paying bills, and potentially missed payments. Instead of neglecting those statements or emails, view it as an opportunity to sit down once a month and take some reflective time to look at where and how money is being spent each month. Rather than focusing on the negative effect, focus on the future goal of paying down each credit card one at a time.

By making slight changes in spending habits, credit card balances can be managed very well. Taking the steps to make the change is not hard, but it will take determination and self-discipline. It may also require guidance from your financial institution or a certified financial planner to help you develop a plan. You’d be surprised at how much stress you can reduce when you have a monthly financial plan and someone helping you stay on track with your financial goals.

Final Thoughts:

Due to their convenience and user-oriented payment options, credit card has become a vital part of our lives. The offers, rewards, and discounts associated with credit cards are unmatched with respect to other financial instruments. They can also assist you in keeping detailed records of your expenditures. But if used unwisely or if you spend more than your limits, credit cards can become huge boulders of debt. Follow the simple hacks given in the blog above and nurture your credit health. Also, share it with someone who you think needs to read it.