Many of the issues arise due to the use of the credit card without proper understanding. If we know what are the common mistakes that many people make while using a credit card, we may not make those mistakes. So, let's look at those mistakes.
Not Paying Attention to Indirect Charges
All credit card companies are fascinated by a variety of attractive features such as zero charges, offers, reward points, etc. It is necessary to analyse and ascertain whether there is actually no charge on credit cards.Most credit cards have no annual fee for the first year only. You will have to pay an annual fee when renewed in the following years.
You may have seen an attractive announcement that this credit card can also be used in petrol bunks. But, it is important to note that there is a 2.5% fee for this. When car owners put in 1000 to 1500 litres of petrol per year at a rate of around 3-5 litres per day, this charge will be the biggest amount. Assuming Rs.100 per litre, using your credit card for 5 litres will attract Rs.12.5 as charges. That means, you would spend anywhere between Rs.2500 to Rs.3750 per year as fee for using your credit card.
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There are different types of charges in the credit card. It is advisable to know and act on various charges such as annual renewal fee, late fee, processing fee for loan installment, withdrawal fee at ATM, etc.
Not Taking Proper Care of Interest Rates
All credit card companies make money through the goods they buy on credit. This means that most people who buy goods through credit cards do not pay for the bill on time. Thus, they are paying high interest rates. Many credit card holders buy it because they get an interest-free loan for about 45 days. Those who are unaware of the fact that they have to pay around 35% - 45% interest per annum when they pay beyond that interest-free period.For example, a person who bought the item through a credit card forgot to pay for a month. He received information that the late fee and interest was 3%. He thought the interest was 3% per annum. But, it is the monthly interest. That is, it is 36% of the annual interest account. From this you must have understood that it is better to pay off the credit card dues in lump sum.
Paying Only The Minimum Due
Some people always think they are acting smartly and are paying only the minimum amount as there is no late fee. But they are unaware that around 35% interest is being paid annually on the remaining amount, excluding the minimum amount. If you continue to pay only the minimum amount, you will continue to pay high interest rates. There are still others who mistakenly think that if they pay the credit card amount monthly, the credit score will go up. If you do this, the credit score will come down.Withrdraw Money at ATM through Credit Card
When you withdraw money from an ATM through a credit card, you will have to pay a transaction charge of around Rs 500. There will be a fee of about 2% for the amount taken. Also, if you withdraw money through ATMs, there is no interest-free grace period. From the first day of withdrawal, you will have to pay an interest rate of almost 35% per annum.Not Paying Attention to Credit Card Security
Credit card number, CVV (Card Verification Value) number and PIN are recorded in their mobile phones and e-mails. This is one of the biggest mistakes credit card holders make. Missing a cell phone and a credit card at the same time is a risk.Do not give credit card details to friends, relatives, family members, credit card employees. If you use the credit card, sign on the back of the credit card. If the unsigned card is lost, there is a possibility of serious trouble. If the shopkeeper suspects that he is misusing the credit card, he is likely to make sure that the credit card holder signs something.
Also, details of expenses incurred through credit cards should be made available to the mobile phone instantly through SMS and mail. It would be a good idea to pay for this facility even if it is charged a little bit. The reason is that if a person's credit card is lost and misused, it can be quickly prevented from being used. It is not wise to lose a large amount for a small fee.
Not Fixing the Credit Card Limit
Once you have received the credit card, set the credit limit to buy goods using it to very low or zero. Make it a habit to increase its range only on/off when you are going to shop with that card. In doing so, even if the credit card fails, there is no possibility of loss or heavy loss.Spending Beyond the Credit Limit
It is advisable to spend within the credit level (credit limit) assigned to the credit card. There is a possibility of higher interest being levied on spending beyond that limit.Also, it is advisable to spend less within the credit limit. It is advisable to use up to about 30% of the credit limit. For example, if the credit card limit is Rs 1,00,000 lakh, it is advisable to keep his/her monthly credit card expenses below Rs 30,000. There will be a risk that our credit score will fall due to activities such as spending beyond the credit card limit and over-using. A bad credit score means you have to pay a higher interest on the loan you are going to buy in the future; Moreover, the loan is not easily available.
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Not Paying Attention to the Billing Statement
Once the credit card billing statement arrives, check if you have incurred all the expenses mentioned in it. Also, consider whether the amount spent is correctly mentioned in the bill.Sometimes there is a possibility that the cost of things you haven't purchased will be wrongly added to the bill. The amount is also likely to be overstated. Also, there is a possibility of overcharging. It is the consumer who has to be vigilant in these matters.
Failure to Pay Credit Card Monthly Due Amount
Some of those who use a credit card feel that it's not a big deal to miss a couple of times to make timely payments. But, in fact, with this act of ours, it is possible that we may end up in a big debt problem. The reason is that if you fail to pay, interest and late fee will be levied on the unpaid amount. The interest on credit card loan is 3% - 3.5% per month i.e., 36% to 42% per annum. Moreover, since this interest rate is levied on the basis of the daily outstanding amount, the interest will keep increasing day by day. When interest is charged on interest, it can turn into a huge loan. Therefore, it is advisable to pay the credit card amount as much as possible in lump sum at any cost.Hope you got to know the frequent Credit Card mistakes made by everyone and you are away from making these mistakes.
