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Common mistakes that you must avoid while using your credit card
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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A credit card is one of the many products that are available in the financial market. It can be very useful if used in the right way, but it can also cause irrevocable harm to a user’s financial health if it is not handled properly. Using more credit when you are facing a financial crunch is not advisable. Falling into debt traps is easier than you think – so always remember that a credit card is basically loaned money. Another pitfall is having your credit card misused.
7 Common Credit Card Mistakes to Avoid
Many online shopping sites have the option of saving card details; this purportedly saves time on the next purchase. But stop and think – is it better to spend those extra five minutes to input your card details again, or risk someone hacking your saved card details?
Lesson: Let God hear your prayers, but not your credit-card details
Buying things because your credit card is offering a discount should not be a reason for shopping. These deals tempt you to make unnecessary purchases, and before you know it, a single purchase has turned into several purchases. These never-ending discounts are designed to lure customers. But stop and think – does paying 10% on your credit card bill to get a 5% cash-back make sense?
Lesson: We are starting our life together, but let's not spend all our money in one day
For many, a good way to pass time while waiting for someone is to shop online over a public WiFi network. Remember, no public WiFi connection is totally safe and your details can be hacked or shared with anyone. It is best to make your payments at home. This way you won’t put yourself at too much risk.
Lesson: Home is where the online shopping story should begin and end
All online sites are not safe. Don't fall prey to an untrustworthy online store. If you really love an item, but aren’t too sure of the store’s credentials, opt for cash-on-delivery. Be wise and don't share your card details.
Lesson: A wise person does not select rock-bottom prices with no security, but rather goes for rocking prices with high security
Too many cards make a deeper financial hole in your pocket. Too many cards mean too many transactions, and too many different dates for monthly payments.
Lesson: You can never have too many friends, but one card is enough to maintain a friendship
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Simply paying the minimum credit balance can earn interest over time. Bankers are lenders, and they judge the borrower's habits based on past payments. Similarly, late payments mean low credibility and low reliability, which affects your monthly credit limits.
Lesson: It does not pay to be late.
Many credit-card companies offer customers ‘Auto Pay’ option for making their payments. While this option saves time, efforts, and ensures timely payments at times, it is always advisable to check your credit card statement and then make the payment yourself.
Lesson: Trusting a machine blindly is irrational
Credit card offers might be tempting, an easy solution, or even offer you great deals, but these offers are short-term. The long-term effect, if not handled carefully, is that you could fall into a trap. Prudence is always right, and prudence says it does not make sense to live beyond your means.
Disclaimer: Copyright Kotak Mahindra Bank Ltd.
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