Are you a first-time credit card user? Having Trouble managing your credit card? Then my friend you have landed on the right page. Owning a credit card and using it wisely to your advantage are two different things. If you do not use it properly then the chances to land in a debt trap increase to a great extent. Not only first-time credit card users but the experienced ones also must keep in mind the things you shouldn’t do with a credit card. We have listed below 6 things to consider while using a credit card that can become a blunder if not kept in check.
- Overspending: The first and foremost thing is going crazy on spending after receiving the credit card. Overspending and using credit cards beyond the pre-approved credit limit can lead you to a possible debt trap. This mistake should be avoided at all costs because it affects your credit score negatively too. To avoid this mistake you can set up the spending limit and on reaching the limit you will be notified so that you become careful in using credit cards further. The optimum credit utilization ratio is considered to be 30%-40%.
- Paying the minimum balance: Another mistake that the cardholder does is just paying the minimum balance to avoid the interest charges. But this is not the case, you are only adding up to your troubles. Carrying the outstanding balance from one Billing cycle to another only aids in increasing the interest rates. Instead of paying the minimum balance try to clear the full balance in one go. This way you will also build a good credit score.
- Late payment: One more foolish mistake that a credit cardholder can make is a late payment. The late payment of credit card bills will only be going to increase the debt ratio for you with high-interest rates. This will burden you on the time of repayment of credit card bills. To avoid such situations you can register for the auto-debit facility.
- Ignore credit card bills: One of the biggest mistakes that you could do in handling your credit card is ignoring the credit card bills. You cannot just keep on using your credit card to make transactions and do not repay the bills. You need to compare credit cards online before applying for the one to get the right credit card that does not cost you a fortune. Bills won’t be paid by themselves, you will have to pay them, either you choose to pay them timely or incur the heavy interest rates along with the outstanding balance. This can lead you to a debt trap and affect your credit score badly.
- Loan your credit card to someone else: Giving your credit card to someone else can be the stupidest mistake on your part. If that person makes a fraudulent transaction and refuses to pay you back then you will land up in a serious situation as you will have to clear the bill of that transaction and the worst part is you won’t be able to justify that the transaction was made by someone else. So, it is advisable not to loan your credit card to anyone.
- Sharing your credit card information: Credit card frauds are on the rise and you keep getting fraud SMS or emails these days and if you happen to share your credit card credentials then again you will land up in big trouble. You have to be proactive in such cases and smart enough to identify the fraudulent messages. Credit card credentials should never be shared with anyone, not even with your family or friends. You should enable two-factor verification so that you get the approval message for the transaction first and if you do not recognize the transaction you can decline the request and save yourself from fraud.
Bottom Line:
With a parting thought, we can say that the above mentioned are the things you Should NEVER Do with a credit card. Using a credit card wisely can help in maximizing the benefits for you. First-time credit card users must know these tips to save themselves from trouble. The first begins at the selection stage where you have to select the right credit card for yourself that complements your spending habits and financial health. A credit card can help in building your credibility or shatter it, everything depends on you how you use it. The catch with the credit card is clearing credit card bills timely and keeping the credit utilization ratio low and you will be good to go. You have to be very cautious while using a credit card so that you do not land up in an unfavourable situation.
Comment on any other mistakes that one should avoid while using a credit card to maximise their benefits.
