13th November 2014 - 4 min read
A credit card comes with numerous benefits and provided you use it well; can be quite rewarding. But whilst some missteps are unavoidable, others not so. Constantly carrying a balance, missing payments and other such bad credit behaviour can have a lasting impact on our financial lives.
To avoid the pitfalls, check out the top ten mistakes people make with their credit cards that cost them dearly.
Typically, the minimum amount you need to pay each month is RM50 or 5% of your outstanding balance. Although, this may seem like an easy way out for those who don’t want to pay in full, the total debt you’ve collected each month would pile up. And, don’t forget that you will have to pay for financing charges. Depending on your total, you might be paying hundreds of ringgit on interest fees alone. Good for the bank, bad for your wallet.
Besides, failing to pay in full shows that you’re incapable of paying off your debts. Essentially, this will hurt your credit score. With a bad credit score, banks will steer clear of lending to you in future.
Imagine the embarrassment when your credit card is rejected at the cash register and there’s a long line of people behind you waiting to pay! Worse and worse if you don’t have cash on hand to fill the gap! But your pride isn’t the only thing you have to worry about. Some banks charge penalty fees for over-limit spending. You will have to contact your bank to find out if yours does charge this fee but whatever it is; you should aim not to exceed your limit in the first place!
An exceeded credit limit just shows you’ve been paying only the minimum every month and this certainly will not do!
We’ve often heard the saying, ”Ignorance is a bliss” but in this case, ignoring your credit card bills means more suffering to you. Despite being the easiest pitfall to avoid, simply take notice and paying your bills feel like a drag. But the real “pain” comes when you’re penalised for late payments and start receiving harassing phone calls from your bank.
Acknowledging and paying your monthly bill enables you to assess your spending and manage your debts, so it does no harm to take a few minutes screening through those figures in case you’ve been wrongly charged.
Cancelling old credit cards isn’t as simple as a filling up a cancellation form. Bank want to keep customers and cancelling your credit card means they lose a business. Once you’ve cancelled your credit card, follow up with your bank and make sure that card is well and truly cancelled. Sometimes, your cancellation may simply be ‘lost’ under a pile of paperwork and you’ll be hit by a rude awakening when you’re suddenly charged government tax on what you thought was a cancelled credit card!
One can have more than one credit card to earn different benefits or to have one for emergencies and one for everyday use. Although, this is normal, having too many cards can get out of hand and encourage you to spend more than you have. If you have 5 cards on hand, you’re paying five times more annual fees, annual tax charges, and interest rates. Freezing your credit card in the fridge doesnt help either as you can’t dodge compulsory tax and annual fees with zero usage.
Not many people read their credit card terms and conditions. Fewer still actually adhere to them. Not checking your terms can get you caught by fees and charges you didn’t even know you had.
There is no evil credit card, just bad credit card users. Now that you’re well informed about these mistakes, avoiding it altogether would put you in a better financial position. Use your credit card wisely and enjoy the perks that come with it.
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