5 Common Credit Card Mistakes to Avoid.

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Credit Cards work on the general principle of buy now and pay later. Apart from providing instant credit access, the cards also provide a host of other privileges, including cashback, reward points, discounts and more. When used correctly, credit cards can be a powerful financial asset. You can not only boost your credit score through these cards, but you can also avail a wide variety of other benefits. However, they are often mismanaged by some of the users. A lot of times, users make some mistakes without realizing how they would impact their finances. So, here we have talked about some common mistakes related to credit card usage which you must avoid.

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1. Missing Payments of Credit Card Bills

Many credit card users think that missing a few payments on a credit card is not a big deal. However, missed payments or even a late payment can lead to a huge debt. This is because whenever you miss a payment, interest charges are levied on your unpaid balances. The important point to note is that credit card interest rates are the highest, ranging from 2% to 3.5% per month, or higher. Also, the interest is levied on a daily basis and hence increases day by day, leading to huge debt. That’s why it is necessary to pay your credit card bills in full and on time.

2. Only Paying the Minimum Amount Due

Credit card issuers make it convenient to repay your balance by allowing minimum payments. However, it is not advisable to only pay the minimum due. Paying the minimum amount and revolving the balance to the next cycle can equally damage your finances as any missed or late payment. This is because interest is levied on the unpaid balance and even when you pay only the minimum amount, the interest charges will be levied on the remaining balance.

3. Taking Cash Advances and Spending on Unnecessary Things

Taking out a cash advance happens to be one of the costliest things you can do with your credit card. It may look like the most convenient way of getting some cash at your disposal, but it is also the most expensive one. As soon as you withdraw the cash, the interest starts accruing on the amount withdrawn.

4. Not Maintaining Credit Utilization Ratio

Using the majority or even all of your available credit limit is not considered a good idea. When you do this, your credit utilization ratio becomes very high which might lower your credit score. Credit experts advise maintaining a utilization ratio of 30% or below. But if you cannot maintain this ratio, try and keep at least 20% of your total credit limit free. This not only helps you in maintaining a good credit score but also ensures credit availability during emergencies.

5. Not Choosing a Right Credit Card

Getting a credit card without being aware of the terms and conditions associated with it is a very common mistake people tend to make. Suppose you are not someone who frequently travels, then choosing a credit card that is primarily focused on providing travel benefits, is not preferable for you. In such a situation, you will neither be able to avail the benefits of the card nor will the card be able to fulfill your requirements.