Common Credit Card Spending and Payment Mistakes

Posted on Friday, August 7th, 2020 | By IndusInd Bank

Using credit cards can be tricky, which is why you need to be extra careful. Surprisingly, most of the users are unaware of how to manage a credit card, thereby leading to several problems such as racking up a high-interest rate, or late payments. Whether it’s maxing out the credit card or missing the payment date, the issues may seem harmless but can wreck up your credit history in future.  If you too are planning to apply for a credit card, here are a few spending and payment mistakes that you need to avoid for a smooth experience. Read on.

Common Credit Card Payment Mistakes

When it comes to making payments for your credit card, missing the due date or paying the minimum balance may seem harmful. However, these common payment mistakes harm your credit history drastically. Here are some of the common payment mistakes that a lot of credit card users make:

Skipping the Due Date

Skipping the due date of bill payment not only harms your credit history but you also end up paying extra in the form of penalties and interest payments. If you are deliberately making late payments because of lack of funds or any other reason, you need to buckle up. An easy way out is to set aside a particular amount for your credit card payments to avoid this issue in future. However, if you tend to forget the due date of payment, set up automatic monthly payments from a particular bank account.

Paying Less than the Minimum Due

Paying less than the minimum due amount has the same impact on your financial health as not paying your bill at all. In short, paying less than the minimum due amount doesn’t save you from delinquency. So, make sure you have sufficient funds to pay at least the minimum due amount.

Paying the Minimum Due Amount

The only advantage of paying the minimum due amount is you don’t need to pay the late fee. However, there is another tricky part of paying the minimum due amount that a lot of credit card users ignore. Unless you clear the entire bill for each month, you will accrue interest on the balance amount that is carried over every month. In addition, if you don’t pay the full amount, you will also miss the interest-free days in the coming month.

Common Spending Mistakes to Avoid

Spending recklessly using your credit card also harms your credit health. Here are some of the common spending mistakes to avoid.

Maxing Out your Credit Limit

Recklessly using your card and maxing out the credit limit has a lot of negative impact on your financial history. Maxing out your credit limit not only damages your credit history but also comes with an extra burden of paying overdraft fees. Maxing out your credit card also implies that you are struggling to meet your day to day expenses or spending more than you can manage. These red flags can be a setback in future when you may need money for some essential financial expenses.

Using Cash Advances

A piece of advice that many credit card holders give is to avoid cash advances. The reason is cash advances are expensive as it accrues a lot of interest and fees. Using cash advances also indicates the issuer that you are in dire need of funds and can’t afford it. In short, you not only end up paying more but also harm your credit history.

Missing your Rewards

If you always pay off your credit card balance in full, you are a great candidate for reward points. Some of the credit cards pay up to 5% in cash back on different purchases or travel rewards that can be very profitable. So, if you travel a lot, you can take advantage of using the reward points to book a flight ticket. Not availing the reward points is a loss as you are paying more for an something that you can easily get at a discounted price.

The Importance of Using a Credit Card

The credit card market has come a long way since its introduction in the 1920s. Starting from attractive cash back, earning reward points to making investments easy, credit cards can help you out in different ways. Credit cards have drastically changed the spending habits and face of business over the years. However, other than these financial conveniences, credit cards can be valuable tools for meeting unexpected expenses or improving your credit score. Here’s why using a credit card is important:

• Improves your credit history when used with care
• Beneficial for booking flight tickets, hotels, cabs, especially when travelling
• Convenient and secure payment method
• Helps in getting small business loans
• Act as a safety net by providing fraud alert via phone, email or text messages

Last Few Words

When used wisely, credit cards can be a great financial asset. Make sure you research about the different types of credit cards available in the market and find out all the benefits before making the final decision. Many financial institutions such as IndusInd Bank provide different types of credit cards that come with a number of perks and benefits. You can find out more about the credit cards here and choose something that meets your financial needs.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.