The outbreak of Covid-19 virus has emphasized on the significance of staying home and maintaining social distance. While doing so ensures safety, it has halted business operations throughout the country, which further led to an increase in unemployment. In such uneventful times, many people are resorting to using credit cards or savings to meet day-to-day expenses or maintain their lifestyle. While using credit cards can help meet your expenses, overspending can lead to a burden.
Here are some common credit card mistakes you should avoid during the pandemic:
- Overcharging Your Credit Card
It is advisable that you do not use the entire available credit limit. It concerns the banks regarding your spending discipline and your ability to spare enough money for making repayments. Also, if the utilization rate becomes exceptionally high, it can eventually lower your credit score. Hence your credit utilization ratio should be less than 50%.
However, if you are at the verge of exceeding your credit limit, try paying in cash for the subsequent expenses. And, in case you tend to break the limit often, either request the bank to increase your card limit or buy an additional credit card.
- Late Bill Payments
It is crucial to pay credit card bills on time. A delay of even a single day can adversely affect your credit score in addition to penal charges and higher interest rates. Skipping a payment altogether can have severe implications. A missed payment is reported to the credit bureaus leading to a tarnished credit score report. Also, multiple delayed payments further make it challenging for you to procure credit cards or loans in the future.
To ensure that the situation mentioned above does not arise, you can set up an automatic payment via your bank with the due date and amount considered.
- Taking Cash Advances and Spending on Things Not Needed
You should avoid taking out cash advances from credit cards. Interest starts accruing on the amount as soon as you withdraw the amount. Also, there is no grace period offered, which is available during regular purchases. Hence, you will be likely to incur a high cash advance charge.
Withdrawing cash on your credit card may attract extra fees as well. Therefore, it is beneficial to save for an emergency instead of paying for access to money.
- Making Only Minimum Monthly Payments
Many banks make it convenient to repay the balance by allowing minimum payments. However, you should pay the entire credit card bill in full. It will prevent you from falling into debt and unnecessary interest charges. Instead, if you increase your monthly credit card payment, it will help you to pay off your balance sooner and at a comparatively low cost.
- Closing Old Credit Card Accounts
Once you repay your balance and wish to consolidate the debt, you might want to give up one or more of your credit cards. You should be aware of a significant factor that makes up your credit score is the length or age of your credit accounts. Therefore, if you plan to give up a credit card, ensure that it is a recent card. In this manner, you can continue to reap the rewards of having an old account.
Knowing these mistakes will enable you to learn about your credit card and avail maximum of its benefits. It will also help you cultivate good credit card habits to use it with utmost responsibility. If you do not own a credit card yet, you should opt for reliable banks like Axis Bank. They provide customized credit cards for individual needs. You can visit the website or contact the bank to learn about the offered credit cards and their benefits.
