Credit card or plastic money is the handiest finance tool that provides instant monetary help. Business Wire reported that the credit card base in India reached 47 million in 2019 and is expected to grow at a CAGR of more than 25% by 2020-25.
The ease of access is probably the largest influencer of this increase in credit card demand, but using it irresponsibly often adds on to worries. Therefore, a borrower must know how to use a credit card to avoid the chances of debt.
Moreover, an individual must know the basics of using a credit card both offline and online to avoid lowering of CIBIL score. Also, a credit card user must understand the smarter way of using it to prevent paying a high-interest rate. Ideally, a person must understand the rules before deciding to apply for a credit card.
What are the mistakes a credit card user must avoid?
Listed below are some of the mistakes a person must avoid while using a credit card
- Not paying the balance
Many credit card users carry the balance amount monthly to spread out payments or free up cash. This habit can be risky as not paying the total outstanding amount before the payment due date can incur heavy fees. Moreover, routinely paying the minimum amount will affect the CIBIL score and credit history.
In case a borrower pays partially to roll over the balance then it is suggested to pay the remaining amount immediately to avoid losses. Therefore, it is crucial to know the proper method of how to use a credit card efficiently.
- Missing payment date
It is the responsibility of every credit card used to repay the borrowed amount timely. An overlooking due date can accrue overbearing interest rates. Moreover, late payments or missed payments for more than 30 days can affect a borrower’s CIBIL score. Determining the monthly payment date is therefore crucial before a borrower decides to apply for a credit card.
- Maxing out the credit card limit
Maxing out the card limit can accrue high-interest rates or lead to debt. However, spending above 30% of the available credit can be regarded as over-dependency on debt, creating a reason for a bad credit profile. Also, cardholders should remember that the limit includes both online and offline credit card usage and balance withdrawal transactions.
Hence, individuals should know how to use a credit card and use it only for necessities or during emergencies.
- Avoiding monthly credit statement
There are times when transactions and billing errors can occur from the lender’s side. This can again leave a bad credit impact on the borrower. Therefore, it is crucial for a credit card used to check the monthly credit statement for no mistakes. If faults are found, the credit card user should immediately contact the financial institution for clarity. Moreover, borrowers should also know how to read their credit card statements correctly either online or from email.
- Being unbothered about missing or stolen credit card
Being unbothered about stolen, missing, or hacked credit cards is the worst thing a credit card owner can do. If there are any fraudulent or suspicious activities on the account, a borrower should immediately report their stolen or lost cards to the lender. Once reported, the financial institution can take necessary action like deactivating the card and suspend the purchases on that card which are not made by the user. Applicants can also opt for cards from a financial institution that offers zero fraud liability cover. It is ideal for a credit card user to know the ways to protect credit cards from being hacked and practice them methodically.
There are financial institutions that offer feature-rich credit cards with Zero Fraud Liability and In-Hand Security. They also provide pre-approved offers for SuperCard, as well as several other financial products like business loans, personal loans, etc. An individual can check their pre-approved offers by filling the name and phone number section.
It is a borrower’s responsibility to understand how to use credit cards online and offline in a smarter way. This will also help increase their creditworthiness and manage the credit profile efficiently.
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