Credit Cards

5 Big Credit Card Mistakes to Avoid

Chances are you have at least one credit card in your wallet right now. But, before applying for a credit card, have you thought to read the fine print and understand the true nature of credit that you are applying for? We have summed up the 5 rookie mistakes any one with a credit card must avoid.

1. Making the Minimum Payment required

By only making the minimum payments with each cycle, you are only increasing the amount you would be paying in the coming payment cycle of the card. The best advice you will get is to pay the exact balance monthly (unless you can’t afford it). It is a popular myth that keeping a balance on your credit card will help your credit score, but this can’t be further from the truth. If you want to maintain a good credit score, ensure that you pay off the balance in full month after month.

2. Paying your Bills Late

Late payments lead to higher payments made with the late fees and interest fees. Set a reminder for the payment of your bill a few days before the due date, or you can also choose to link your credit card with your savings or checking account for an automatic alert and payment option. Please note tat payments that are 30 days overdue can hurt your credit score.

3. Applying for too many credit cards at one

A common rookie error is applying for too many credit cards at once. Apply for new credit cards based on your needs. Applying for several credit cards at once will create more issues as lenders will suspect about the increase of credit card applications. Credit cards also have hidden annual fees that will add up in costs if you decide to hoard too many cards. Another plus by having one or two cards is that you have all your financial transactions in one or two places and its easier to keep a record of your purchase history.

4. Take out Cash Advances

Do not take a cash advance on your credit card unless under emergency circumstances. The interest chargers for a cash advance on your credit card are extremely high; there could also be other privilege charges that would have been included in the fine print of your credit card application agreement.

5. Delaying report of lost card or fraudulent charges

As soon as you are aware of your credit card being lost or see that you have been charged for a transaction that you didn’t personally authorize, report your credit card immediately. By delaying this process, you are only allowing the thief to run up further charges on your account. By taking swift action, you may also be able to cancel charges immediately and receive a charge back on the amount.

How to pick the best credit cards for your lifestyle

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There are several factors that come into play while choosing the right credit card. No credit card is better than all the others. You need to sum up the benefits that are important to you and then make the right decision in terms of the credit card that will provide the best value for you.

Everyone should own at least one credit card, picking the right one will make spending much easier and you will also be able to benefit from the rewards and bonuses once you have regular expenditure on the card. We have round up some tips to ensure that you pick the right credit card based on your lifestyle.

Read the Fine Print. Always read the “Terms & Conditions” when you plan to apply for a credit card. Read about the cost and benefits of the credit cards – this should be listed under “Interest Rates” or “Pricing” or “Offer details”. In the offer details, you may also find out other benefits that are connected to your card; this may include vehicle insurance, price protection, etc.

Also, look out for the Annual fees on a credit cards. Generally, the cards that offer the higher rewards are generally the ones that charge an Annual fee. Cards with no annual fee may provide less value in terms of reward points.

Based on your credit history, your credit card company will let you know the maximum amount of credit that is allowed on your card. This is important as you don’t want your monthly spend to be very close to this amount. This means that there is a large possibility of maxing out your credit limit. Too many instances of this will hurt your credit score. By maxing out the limit, you are also liable to pay the penalties that come with it.

Pick a credit card that provide the best reward value for your lifestyle. Cash back is a very popular credit card reward as it isn’t niche specific and allows the user to spend on the card however he wants. There are other perks offers such as travel and retailer discount; this makes sense if the primary spend on your card is on travel or retail purchases. Do not apply for such cards if you think it will only tempt you to spend more towards these expenses.

If you are traveling abroad, it always makes sense to check the conversion rates that you are getting on your card. Apply for a credit card that offers low or no foreign transaction fees.

Use a good credit card comparison tool. Remember, to always read the fees and benefits on the account and make your payments in time!

5 things to know before switching credit cards

Changing credit card isn’t exactly convenient. So, its important not to dive in and consider the consequences before making the big move. We have listed the top 5 points to consider before switching credit cards.

1. Pick a credit card that suits your lifestyle

Chances are once you picked a credit card, you really start to get a hang of what’s important to you. Are you happy with the rewards and benefits of the card? Maybe, it made more sense to go for a Cash Back or Travel rewards to get the most out of the card. Pick a card where the rewards are more valuable to you – it could be the cost of the card, the reward type or overall better perks and benefits.

2. Clear your existing credit card debt

Call your current company and understand the exact balance owed to them. Ensure that you pay off this full amount before switching companies. This way, you will not be left with any debt and won’t have to pay any penalties on it. Once this is done, make sure that you close the account to avoid paying any annual fees on it. Also, make sure you transfer any direct.

3. Understand what you miss out on by leaving your current credit card

Don’t switch credit cards for the wrong reasons. At times, people change credit cards because they got hit by a late payment fee or they didn’t use up the rewards in their card on time. Please note these issues will exist with you new credit card company as well. You need to be on top of the payments and ensure that you use the rewards attached to your credit card to your best advantage. Separately, your benefits may no longer exist once you close your card or are eligible to expire soon. Make sure you use your benefits before you close your card.

4. Choose your credit limit with care

Always choose a limit that allows you to make a large purchase but doesn’t tempt you to make purchases beyond your spending power. For a good credit score, spend 60-70% of your credit card limit. If you are planning for an upgrade, ensure that you comply with the eligibility criteria of the new cards. A few premium credit cards have minimum annual spends required on the card; if you fail to spend this amount, an annual fee may be charged on your card.

5. Don’t use both credit cards

Once you have activated the new card, resist the temptation to use both cards. It may look like it makes more sense as you will get rewards and benefits from both cards, but in the long run, you will end up losing money in charges, interest fees, etc. By sticking to one credit card company, you will also have a record of your purchase history in one place.

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