Plastic cards are very common today. Many people make payment for purchases online and even in the bricks and mortar shops with them. But despite its popularity, the truth is that a lot of people don’t have them and many are newbie as far as these credit cards are concerned and thus they make a lot of costly mistakes during this initial stage. These pitfalls are not limited to first time users. Some unsuspecting and naive old time users are also guilty of such mistakes. It can indeed be very complicated for some people to manage credit cards and understand its numerous uses. Exact BIN is the main thing you should always check. In case you are a beginner with credit card, here are common mistakes that you should avoid.
- Leaving balances and paying only the minimum
This is a very common mistake among new users of credit card. They make this mistake because they operate with the belief that having a balance every month will help them to build a positive credit rating. This may appear to be very plausible but actually it is not true for a new card user. It may be the right approach for an old customer. But normally, the credit cards of first time users are made to have exorbitant APRs. Some may be up to 25%. If you pay only the minimum and leave some balance on monthly basis, the amount of interest charged on your purchases definitely will be higher. This will in the long run create huge debt for you. The best thing to do is to pay your balance completely every month as this will help you to save on interest and improve your credit rating.
- Maxing Out Your Credit Lines
Definitely, new users are likely to find a new credit line very captivating as with it, they will be able to pay for large orders or things they like in order to gradually repay them. No matter how simple and interesting this plan may appear to be, if you max out your credit lines, it is likely for your creditors to see you as a person that can easily default on their balance. Spending up to the limit of your credit line also has a negative effect on your utilization ratio which is a very important factor in credit score. It is advisable to reduce your spending so that you will be able to keep your total debt-to-credit ratio below 30%.
- Hunting for promotional offers and rewards
Many issuers of credit cards sometimes include some perks and bonuses in order to attract new customers. Though some of these rewards and bonuses are worth going for and can give you some benefits, but in most cases, you are meant to pay for them in one way or the other. Cards with such rewards may have high interest rates and other charges. The issuers get back their money through these offers.
- Paying for all your daily purchases with your credit card
It is not advisable that you use your credit card all the time or for all purchases. You can use credit cards for all purchases only when you are able to clear all your debt on monthly basis. Such purchases can also be paid for with points or a particular reward earned. Apart from these situations, make cash payment for your living expenses like toothpaste, toiletries, groceries and others. You may end up spending more if you pay for these transactions with credit cards.