Credit cards that are issued by practically all banks and financial institutions in the country are an amazing tool. These cards help people to purchase things and pay for it on a later date. This is one of the real benefits which lure people to get a credit card. The card whenever utilized wisely can enable the people to build his/her credit rating. There is no denying to the reality that having a decent financial score is essential as banks look at it before approving loans, credit cards, etc.
While a credit card is helpful in numerous respects, the harm it can do to the individual is endless, if the card isn’t utilized appropriately. Some of the damages that can happen to the person for not utilizing the credit card appropriately are falling into debt, low credit score, etc. Here, we explore certain mistakes that should not be done by credit cardholders to guarantee that things like the ones referenced above don’t happen.
Keeping a High Balance in the Credit Card
People who utilize a credit card should always avoid maximizing out the credit limit. This is nevertheless of the fact whether the amount is cleared out before the due date. Maximizing out the whole credit limit can bring about a low credit score as the credit utilization of the individual is determined by dividing the credit card balance by credit limit. It should be referenced that getting close to the credit limit puts the person at risks like over-the-limit charges and penalty interest rates.
Closing an Old Credit Card without Any Good Reason
Another mistake that should be avoided by credit card holders is closing an old credit card without any justifiable cause. This is on the grounds that closing a credit card for no substantial reason can influence the credit score of the cardholder. However, there are situations when closing a credit card can be beneficial. Such situations are –
- If the individual is paying yearly fees despite the fact that the card isn’t being utilized.
- If the credit card is a verified one and would bring about the individual getting back the deposit.
- If the individual faces spending issues and wants to get rid of this temptation.
Being Naive of the Benefits that Come with the Credit Card
Most credit cards offered by different banks and financial institutions are bound with different advantages. So, not knowing about the advantages of the credit card which the individual uses is a mistake. To guarantee that more benefits can be drawn out of the credit card, monitoring the advantages is a need for the cardholders. People must find out about the features and benefits of the credit cards and ensure that it is utilized sensibly.
Not Reporting of the Lost/Stolen Credit Card
Another normal mistake which credit cardholders make isn’t reporting the case of lost or stolen credit card to the issuers. It is essential to report the loss of the credit card on the grounds that once it is reported; no false and fraudulent transactions can be done with the credit card. It should be remembered that if false transactions are completed utilizing the card before the concern is reported to the issuers; the individual will have to incur the charges.
Paying the Credit Card Dues Manually
Paying the credit card dues manually is one more mistake from which cardholders should stay away. This is due to the reason that there are occasions when the due date to make the payment can be forgotten by the person. So, the best thing is to go to autopay. This guarantees the individual can avoid paying late expenses and taking a hit on the exceedingly significant credit score.
Benefiting a Loan on the Credit Card
An individual should no matter what; abstain from availing a loan on the credit limit. This is due to the fact that it is a horrendous idea irrespective of how enticing it may sound. Banks and financial institutions charge extremely high-loan fees on credit card cash advances. They accompany no grace period which implies that interest starts accumulating right away.
Not Utilizing the Earned Reward Points
Perhaps the best thing about credit cards is that people procure reward points for practically all transactions that are done with the credit card. But, numerous cardholders fail to use the reward points that they win. This is a mistake from which credit cardholders should stay away as the reward points can be used to avail different things from the bank’s list.
Paying Only the Minimum Due Amount
One of the normal mistakes that credit card holders make is paying just the minimum amount that is due on the credit card. While this move is utilized by most banks and financial institutions to draw the client’s attention, but the cardholders must avoid it. The purpose of this is making payments of the minimum amount increases the time that is expected to pay off the remaining amount of the card. Aside from this, the individual ends up paying significantly more sum as interest.
In the nutshell
Ensuring the mistakes referenced above are not committed can prompt the individual having a decent time utilizing the credit card. Utilizing the credit card sensibly will guarantee in building a good credit history.