Credit Card Mistakes to Avoid

17 AUGUST 2023

A credit card may be a useful instrument for making purchases, earning incentives, and building credit. You may take advantage of benefits while avoiding risks.Couple on couch, smiling at a laptop and man holding a cardA credit card may be a useful instrument for making purchases, earning incentives, and building credit. That is if you use it correctly. You risk suffering fines and charges if you don't. These can be expensive, and some of them may even damage your credit. You may take advantage of benefits while avoiding risks by learning how credit cards work.

Here are some things we suggest to stay away from.

Avoid making late payments

There are various repercussions to missing your payment deadline. For example, if your credit card payment is late for the first time, issuers may charge you a fee. If you're late again during the next six months, lenders might charge you a larger late fee.

Credit rating also takes into account payment history. Once payment is 30 days late or more, your credit score may suffer. And unfavourable information like this can linger on your credit reports for years. To help yourself remember, consider using debit orders or setting a reminder a few days before the payment is due.

Misunderstanding interest charges

Interest on a credit card is the cost of borrowing money. The good news is that if you pay your debt in full by the due date each month, you may avoid paying interest on new purchases. Different interest rates may apply based on the kind of transaction. Cash advances and debt transfers, for example, may have higher rates or extra costs. And, there may be no grace period for those transactions. If you have any questions, contact your card issuer.

Don’t neglect looking over your statements

Your credit card statement is a document that, among other things, describes your credit card activities for the preceding month. While that may appear dull, your statement contains a wealth of useful information. Knowing what's in it might help you maintain good credit.

Your statement, for example, shows your balance, minimum payment, and due date. It also informs you how much interest you'll have to pay if you merely pay the minimum. It might also be an opportunity to detect fraudulent activity on your account. You may at the very least check your statement to see how much you owe and when you owe it.

Avoid maxing out your credit card

When you apply for a credit card, the issuer will set a credit limit for you. This is the most you can put on your credit card. While you are permitted to spend the whole credit limit, doing so may negatively impact your credit scores.

That's because a percentage of your credit score is based on how much credit you're utilising VS how much you have available. This is called a credit utilisation ratio. Experts suggest not using more than 30% of your overall credit limit across all accounts.

Avoid applying for different credit cards too soon

Nothing prevents you from applying for many credit cards, but you should be aware of the potential negatives. The card issuer will pull your credit history when you apply for a credit card. Applying for many credit cards in a short period of time might temporarily lower your credit score. Furthermore, it may give lenders a false idea about your financial situation. Applying for cards that suit your credit profile and waiting a few months between credit card applications can be a wise decision.

Report a stolen or misplaced credit card as soon as possible

If you report a missing credit card before it is used, you may be exempt from liability for any charges you did not approve. This is because certain credit card companies may release you from any accountability for fraudulent payments. However, the most important thing is to report a lost or stolen credit card as soon as possible.

Compare credit cards before applying

Because a credit card is a financial commitment, you should be sure it meets your needs so you can use it properly. Shopping around can help you avoid costs and obtain the best interest rate.

Pre-approval is a good indicator that you possibly qualify but it does not ensure approval. If there is a good chance that your application is going to be rejected, rather wait a little longer if possible before applying. Researching might also be beneficial. Knowing that you have a good credit score might help you narrow down your choices.

Overall, don’t be too hard on yourself for making mistakes. Learn from your own mistakes and those of others.