Now there are lots of offers to apply credit cards with easy terms and conditions. But it turns out that many apply for credit cards because of their attractive offers or benefits regardless of the danger of credit cards if they are used carelessly. Let’s look at 23 credit card usage errors that you need to know before applying for a credit card.
Usage Errors Know Before Apply Credit Card
When the bank offers a credit card submission, the bank will certainly notify the benefits offered along with all the terms and conditions of submission. But has there ever been a bank that told you mistakes that you should avoid so that you don’t get caught up in a pile of credit card debt? That’s why you need to know the mistakes that you can avoid before applying for a credit card.
Only by avoiding these mistakes can you feel the benefits of using a credit card. Through the following article, the Palliser family invites you to see 23 credit card usage errors that you need to know before applying for a credit card.
Forgot to Pay
The most important mistake is not to forget you pay off your credit card bill. This not only affects the amount of your credit card debt, but also affects your credit score . In detail, the losses that will arise due to this error are:
- The accumulation of credit card debt
- The emergence of additional costs in the form of fines or interest that is enlarged due to late payment
- Affect your credit history in the long run that will make it difficult for you when you need credit in the future
Make a Minimum Payment
In credit card payments, banks generally determine the minimum payment amount that must be paid no later than at maturity, usually worth 10% of the total bill. However, many credit card users do not know the consequences of making a minimum payment, namely the interest charged on the remaining outstanding balance.
You also need to know that usually late interest tends to be high so it is very dangerous for your finances. Avoid minimum paying habits now to prevent financial havoc!
Submitting Credit Cards Outside of Financial Capabilities
Before applying for a credit card, you should first measure your financial capabilities. If you apply for a credit card whose qualifications are not appropriate, chances are that you will only accumulate debt. If you are unsure of your financial capabilities, ask for a credit report from the bank to see your financial capability standards before applying for a credit card.
Not Reading the Terms and Conditions Carefully
Know that what is said by the bank is usually only a small part of all the terms and conditions that cover the use of your credit card. When you apply for a credit card, it is wise to read every point in the terms and conditions. Like a contract, all of these points are protected by law so you need to understand them before falling deeper.
Actually this error can be avoided with a number of precautions, including the following:
- Choose cards that are free of annual fees and administrative fees
- Avoid late pay
- Choose a card that is free of foreign transaction fees
Choose a card that suits your needs and keep an eye on its use so you don’t have to pay costs that hurt you.
Underestimate the Annual Interest Rate
In addition to the costs that may arise on a credit card, the Annual Percentage Rate (APR) is one that credit card users usually ignore. This annual interest rate is the annual interest rate that is legally enforced for your loan. Know the APR applied by the bank before you apply for a credit card.
Habit of Taking Cash Advance
Cash advance is the amount of funds that can be withdrawn from a credit card via an ATM machine. This makes it easy for users to get fast cash. But herein lies the problem: advance cash can actually be more detrimental than other types of loans due to additional fees and high interest rates imposed on the loan.
Not wise in Balance Transfers
Balance transfer is the transfer of bill balance from one credit card to another credit card. Usually this balance transfer is done because the customer gets a credit card offer with a lower interest rate. However, it is important to calculate the feasibility of transferring this balance carefully because usually the transfer of balance will be charged a certain fee by the old bank. Do not let the transfer of your balance actually lead to losses.
Maximizing Credit to Debt Ratio
The credit to debt ratio is basically the ratio of the maximum amount of credit card debt that can be borrowed. If you maximize or even exceed the credit to debt ratio that has been agreed upon, the lender will assume you are not responsible for your payment ability.
Choosing Card Features that Don’t Fit Your Needs
Before applying for a credit card, it is important to choose a credit card with features that are not only attractive, but must suit your needs. Why is that? This will affect the additional costs that you make later. Retrieving inappropriate features will only result in credit card profits that are not maximally utilized.
Impulsive Purchases because of Rewards
Have you ever received a bonus or reward due to the use of your credit card? For example, you get a voucher to stay at an overseas hotel for 2 nights. Making use of these rewards is good, but you should be wise to calculate other costs that need to be prepared, such as airline tickets, consumption costs, souvenirs and more. Do not let you spend unexpected costs just because the reward is of little value.
Make Good Use of Rewards
Another mistake of using a card with a certain reward is not being aware of the provisions of the reward itself. Suppose you get a reward in the form of a voucher but with a minimum purchase requirement or with a usage time limit. Sometimes the benefits are not in accordance with the needs so they are not used and the ends are in vain. You should look for a credit card with benefits that you can maximize.
Opening an Additional Credit Card
Now having a credit card is not as easy as turning your palm. Many young people have difficulty obtaining credit cards because they have not had enough income or not enough age. You can actually open an additional credit card for your child or parent. But know that all bills and additional credit card responsibilities will be borne by the main credit card owner, you.
Resign with Interest Rates
If you have a credit card with high interest rates, it never hurts to negotiate these rates with the bank. Don’t just surrender to the situation and pay the costs you can actually save. If the bank does not approve this negotiation, maybe it’s time you switch to another credit card.
Leaving a Credit Card Bill
Paying off credit card bills every month in full is too ideal for some people. But leaving a credit card bill will affect your credit history and result in additional debt that you will bear.
Have Too Many Credit Cards
In addition to the difficulty of arranging a lot of credit card bills, the use of too many cards will affect your credit history you know. The lender will easily see that you have difficulty paying and will be hesitant in giving you a loan later.
Choosing a Credit Card Based on Attractive Offers
Today many supermarkets or retailers offer credit cards with attractive facilities or offers at the beginning of the submission. For example: submit an A credit card now and get a 10% discount on your first purchase. Such offers only encourage applying impulsive credit cards that will harm you because:
- Generally the interest given is greater than the credit card interest in general
- Profits or offers obtained only 1 time only or only at the beginning of the credit card submission
Relying on a Credit Card in an Emergency
Never rely on credit as a solution to an emergency. It is indeed a practical credit card and is always available so it is suitable for use in emergencies, where cash is not always taken anywhere, but you need to provide an emergency fund that can pay the credit card bill. The use of a credit card only facilitates transactions, not to pay for your emergency needs.
Close the Old Credit Card
Again, one of the common mistakes that will affect your credit history is closing the credit card that you have been using for a long time. Your credit score is influenced by the length of the credit history, so when you close a credit card, the available total credit value automatically decreases and increases the credit utilization ratio . Therefore, consider carefully before you decide to close the credit card you have been using for a long time.
Leaving the Credit Card Off
Apart from closing credit cards, there are also many users who let some dormant credit cards. This is actually not too dangerous, but if too many credit cards are left inactive, again your credit history will be shaken.
Not Checking Credit Card Bills Thoroughly
It is important to always check in detail and carefully on your credit card monthly bills. Because you usually don’t realize that there are costs that you really shouldn’t pay, or maybe interest rates suddenly change and become higher. This check only requires a little time, but it is very influential to prevent losses for you.
Not Maintaining the Security of Credit Card Information
Credit card fraud today is getting more intense, and you certainly don’t want to be one of the victims right? The key is easy, don’t let your credit card information be known to others. All information including credit card numbers, credit card PINs, and your personal data is confidential information that anyone other than you may not know.
Using a Credit Card Regardless of Financial Capabilities
The temptation to using a credit card is indeed very much, for example is the discounted promo and rewards that you can get. But do you remember that a credit card is only a loan product that you have to pay later? Do not let the temptation defeat you so that the pile of debt increases and inhibits the process of financial freedom.
Enjoy the benefits, avoid the mistakes before applying for a credit card
After learning a few errors in using a credit card, you can now apply for a credit card calmly. You will feel the benefits and benefits without having to bear the risks that can actually be avoided. Don’t be afraid to apply for a credit card, you just need to study the benefits and misuse it carefully!
Do you have questions about using other credit cards? Leave your comment below . If you have questions, please submit your question in the column below. Our Financial Planner is ready to help you, thank you.