Using credit cards is a regular occurrence in present times. It has impacted our lifestyles greatly, giving us the financial freedom in times of need. These give us benefits of cashless transaction, reward points and discounts, good credit score, and a lot more! But it is very important to take note of how you use your credit card. Quite often credit card payments are overlooked, resulting which you end up paying huger sum of interests on higher amount of dues. This impacts your credit score greatly and also tends to trigger a debt-trap for you in the longer run.
To avoid being a prey of such an unforeseen scenario, here are the six bad credit card habits to quit right now!
- Paying the minimum dues on your credit card – When you owe an amount to your credit card provider, you are provided with a minimum payment amount cap which is generally 2% of the total payable amount. If you are only paying back the minimum amount, your card provider is up for gaining bigger profits! He is only looking to let you carry bigger burdens of repayment so that he could charge you bigger amounts of interest in the long run. This creates a negative impact on your credit score and traps you in a never-ending process of credit repayment.
- Looking for better reward points – Credit cards often bring you several reward points on completion of certain benchmarks. While these can also be seen as benefits, if you flip the coin, you will see that credit card providers lure you into shopping more and more, thereby adding numbers to your overall credit figures! These are actually marketing gimmicks which you should stay safe from.
- Missing/Overlooking Payments – Avoid making late payments for your credit card If you delay making payments for your credit dues, you might be bogged down with a terrible credit score, penalty payments, unpleasant payment reminder calls and a lot more. You would not want to pay hefty payments on interest and late fees for a skipped credit card payment right?
- Exploiting cash advances – Cash advances are quick solution to your emergency needs. But if you are withdrawing money from an ATM with a credit card, you must be aware that the interests levied on the amount are calculated from that point of time instead of being levied after a month. The interests keep accumulating without a grace period. So, be very sure of when you need a cash advance.
- Overspending – Your credit card expenses should be done according to your income. Ideally, you should not spend more than 50% of your balance, failing which you may have to face huge difficulties in paying back. This is where credit cards trap you. It continues to suffice for your needs even when your bank account dries up. So, you better be careful before overspending!
- Applying for new credit cards – Having more than one credit card can sometimes turn disastrous for you. You will end up spending more, and have different liabilities toward different credit card So, it is better to stick to your exact needs and choose the number of credit cards that you can afford to use.
Ensure staying away from these bad habits of using a credit card, and you would have a healthier financial position in the nearer times to come.