6 Credit Card Mistakes to Avoid  

The benefits and conveniences offered by your credit card can hardly be found in any other financial tool. However, the same conveniences can also turn against you within a short span of time if you fail to take care of certain obvious but commonly ignored points. Avoid making the following mistakes and enjoy a hassle-free experience of using your credit card. 

Not paying dues on time: The first and perhaps the most crucial point is the timely repayments of the dues on the cardEnsure that you pay the dues by the due date to avoid future financial problems. Even if you can’t pay the entire amount at once, the amount paid should be as close to the total dues as possible. 

Benefits: If you pay the entire amount by the due date, you save yourself from paying the relatively high interests that are usually associated with credit cards. And being aware of the fact that interest rates can be as high as 45% would add to your motivation to make the payments on time. 

Mindless spending: Just because you have a credit limit at your disposal, it doesn’t imply that you should exhaust it on products or services that you don’t really need. Don’t ever forget that the individual who would have to repay all the debts at the end of the billing cycle is you.  

Benefits: Exercising financial discipline is a great practice that would save you from accumulating high debts and falling in any kind of financial debt trap. And cutting down on impulse purchases is a great move to this end. 

Withdrawing cash: Withdrawing cash with your credit card, also called cash advance, should be avoided until the need is pressing and there is no other option. That’s because the interest rate on the cash advance facility can be up to 43%-45% and the interest amount starts accumulating from the date of withdrawal itself. 

Benefits: By avoiding cash advance, you avoid the interest that accumulates from the first day itself. You also avoid the one-time cash processing fee that is usually 2.5-3.5% of the amount withdrawn. 

Not using reward points smartly: You may not be aware that transactions with your credit card give your reward points that can be redeemed for attractive gifts and privileges from select top brands in the market. You can also opt to pay the outstanding on the card with the accumulated points. 

Benefits: By using the accrued reward points smartly, you can save your hardearned money on the products and services that you desire. In the long run, the amount of money these points save for you would be substantial. 

Paying only the minimum dues: As already explained, paying just the minimum amount due on the card is not enough. There are 2 major drawbacks of this – first is the high rate of interest on the balance amount. The other is that you don’t get the interest-free period of up to 50-55 days that you usually enjoy on all your purchases with the card. 

Benefits: Perhaps the biggest attraction of paying the entire amount due by the due date is that you enjoy an interest-free period (grace period) on most of the transactions. This is one of the significant benefits offered by credit cards. 

Utilizing a high percentage of credit limit: The percentage of credit limit (also called credit utilization ratio) that you use on the card during any should be below 30%. This is a very important factor in maintaining a high credit score.  

Benefits: As already stated, to have a high credit card, you must keep your credit utilization ratio below 30%. And your credit report indicates your credit-worthiness to the banks whenever you apply for a loan or another credit card. 

If you could avoid making the credit card mistakes listed above, there’s no reason why you wouldn’t be able to extract that best that your card has to offer. Be judicious while spending with the card, never overestimate your repaying capacity, and pay the dues on time.