5 Credit Card Mistakes to Avoid During This Pandemic
Given the income uncertainty during COVID-19 pandemic, it has become essential to look again at every aspect of your financial spends, which primarily includes debit or credit card payments. Read on to find 5 credit card mistakes you should avoid during this pandemic.
Credit cards can be of great assistance in retrieving instant credit and adjusting short-term liquidity malfunctions, especially during uncertain times such as the current one. However, lack of knowledge about credit card usage can put one in a debt pit, damage their credit score and may also result in paying more interest.
Here are some credit card mistakes to avoid, in the current conditions,
- Availing Moratorium on Dues
Credit cardholders unable to fund their credit card bills will continue to make use of the regulated moratorium on credit card payments. Nonetheless, doing so will only stop the credit bureaus from incurring further late payment fines and unfavorable coverage.
Those who do not pay their outstanding credit card bills will continue to incur substantial financial charges. As a result, they could be left in a debt trap by taking the suspension because the unpaid credit card balances will begin to mount up together with high financial costs.
2. Withdrawing Cash
Cash withdrawals by credit card suffer dual payments in the form of cash advance payments, up to 3.5 per cent of the withdrawn amount. It also includes the loan fees from the day of the withdrawal to the date of repayment of that amount. These two charges combined, mainly if done regularly, will burn a deep hole in your wallet.
3. Expiring the Rewards Points
Credit card issuers view their reward points to their cardholders as a USP or an added bonus. Many cards require such redemption points to be measured against the card’s unpaid balance and others require them to purchase pre-specified benefits and items such as fares for flights, petrol, luxury and so forth.
Though, most credit card reward points come with a pre-defined expiry period of typically 2-3 years. Many holders of credit cards fail to register these expiry dates and therefore forfeit their accrued points of compensation.
4. Not Spending During Interest-Free Credit Period
Interest-free time refers to the span between the day of the credit card issuance and the reimbursement due date, which typically extends from 20 to 52 days or anywhere. Payment card purchases incurred during this time do not bear interest rates as long as the due date reimburses them in the form of payment charges.
Hence, during this time period, the card issuer invests the money for free. This functionality can be extremely beneficial in periods such as these where many experience short-term liquidity malfunctions.
5. Maintaining credit use Ratio Over 30%
The ratio here refers to the percentage of the total credit card limits you use. Given that borrowers typically consider a credit utilization ratio of more than 30 per cent as a sign of being desperate for credit, credit bureaus often drop the credit score by a few points in violation of this limit.
To work at building and retaining a good credit score, make sure that you keep your overall credit card spending under 30 per cent of the total credit cap.
These are some common credit card mistakes that should be avoided during the pandemic situation. Using credit cards surely appears to make life a lot simpler, but one must know how to properly use it.
For a significant portion of the accepted cap left on your accounts, you feel relaxed at any time buying items you want. You may even understand how credit cards work and how to treat a credit card safely, but the devil’s in the details. However, if you do not have a credit card, you can apply for the same from reputable financial institutions like Axis Bank. Avail exciting offers, and also enjoy benefits of cashless payment for your every need.