Common Credit Card Mistakes ~ The International Finance

Friday, 4 August 2017

Common Credit Card Mistakes



Credit cards are everyone’s gateway to whole different world. These cards may be small and unassuming but the power they wield over mere mortals is unparalleled. Credit cards are similar to miniature loan providers without having to avail approval and furnish documents every time a transaction is required. All individuals will have to do is pay their credit card bill by the end of the month or whenever their billing cycle is. However, credit cards are provided by the bank or financial organization based on the individual’s income and also their credit score if it is not their first card.

These cards come with a number of additional benefits such as card offers and such on dining rewards, airline ticket discounts, lounge access, attractive cashbacks and so on. However, these will not matter if individuals do not utilise their cards in the right manner. Although credit cards come with a large number of advantages, if not used correctly, can be detrimental to the individual’s credit history.

Given below are some of the common mistakes that individuals make when they use their credit card-

    Having multiple credit cards

This is one of the most common credit card mistakes that is noticed. There are a number of credit cards available in the market today with a plethora of offers. Individuals receive a number of offers from banks regularly and are tempted by the supposed advantage that is provided by the said credit card. However, although different credit cards come with different offers, they may cause more harm than good.

Since these cards provide different offers and schemes, individuals tend to use them all resulting in their having to pay a high fee for all these cards by the end of their billing cycle, which the individual may not be able to afford. This practise in turn, will lead to his/her falling deeper into a debt cycle.

Individuals need to stop and think if they really need a credit card if they receive an offer. They will have to remember that offers may not be permanent. Credit cards should not be considered as a supplementary income. Although adding cards will help the individual’s credit score by reducing their credit utilization ratio, the amount of debt will rise if all bills are not paid on time.

    Paying just the minimum balance

This is one the most common mistakes that are made by credit card holders. Most individuals believe that they can continue using their credit card comfortably by only paying the minimum balance that is necessary. However, far from being convenient, doing this will only lead to the cardholder going deep into debt. If individuals do not pay off their credit card payment bills fully each month, it can result in interest rates adding up which can result in a hefty amount. Therefore, as much as possible try to pay the entire bill in one go or at least more than the minimum balance amount.

    Exceeding Credit Limit

It is important to ensure that credit cards are not misused in such a way that the credit score is affected. Another common credit card mistake that is noticed by most experts is the usage of credit cards over the limit that is set. It is easy to think that credit card bills can be paid easily after sometime but it does not work this way. Customers should understand that debt utilization ratio is a huge factor that determines their credit score. Ideally, one should never keep a balance of more than 30% of their credit limit.

    Closing Credit Accounts

It seems sensible to close a credit card account if one is not using that particular card. However, contrary to popular belief, doing so is detrimental to the individual’s credit score. This is because the credit utilization which is the ratio of the credit card balance transfer to the credit limit has an impact on the credit score and should always be below 30%. By cancelling a card, the credit limit of the individual goes down which reflects poorly in the individual’s credit report.

    Withdrawing Money via Credit Cards

A credit card mistake that most people are aware of, withdrawing money using credit cards should be a big no! no!. This is important for the simple reason that the interest charged on such transactions are exorbitant. Unless that particular individual makes the complete bill payment, the interest charged will be high and difficult to pay off. Therefore, taking cash through a credit card should never be done unless extremely urgent.

There are a number of other mistakes that credit card holders make such as not reading the fine print of their credit card document, choosing a credit card because of its offers, paying a high annual fee and such. However, taking care of the above points and using their credit card judiciously will ensure that individuals get the best out their credit cards without hurting their score as well.

This article is contributed by Ileyana  Lyardson, who is a content marketer and financial writer by day and a reader by night. She has 7 years of experience in the financial domain, predominantly in the insurance business. She is passionate about travelling and also maintains a blog where She offers financial advice and review of insurance products to individuals planning their featured life.

About Author

Amit Singh is a founder of Theinternationalfinance.com he share his immense knowledge of Finance in this blog.

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