5 common credit card mistakes and how to avoid them

A credit card is undoubtedly one of the greatest inventions of our time. Being able to get around and take in everything the material world offers without having to fret about carrying cash on your person is a greatly relieving experience.

Aside from credit, it also offers you rewards and incentives that add more value to that experience.

However, despite being such a convenient asset, used improperly, a credit card could end up costing you. Sometimes, users let their credit balances spiral out of control and end up swimming in debt. But worry not. Every one of these situations can be brought under control or averted altogether, simply by changing some of your habits.

In this feature, we'll be looking at five of the most common credit card mistakes people make and how you can avoid them:

Don't stick to bare minimum payments

It's understandable that occasional cash flow slowdowns can force you to hold off on making a full repayment of your credit card bill and only pay the minimum due amount. However, while it's fine to do that once in a while, making a habit of it can snowball into a world of debt.

This is because the more balance you keep carrying forward each month, the more interest you eventually end up having to pay. Ideally, you should plan your credit card purchases in such a way that you can pay off the entire month's balance each time. But if you're unable to do that for some reason, at least do your best to clear off as much of the balance as possible.

Don't close your oldest credit card

A lot of people have multiple credit cards to their name. Aside from the basic convenience of having alternate cards to fall back on, credit card brands constantly tie-up with e-commerce outlets to offer enticing discounts and no cost emi deals if a purchase is made using their card. Having multiple options allows you to take advantage of the best credit card offers.

More importantly, however, maintaining multiple credit accounts over a long period of time boosts your credit score, since the average period over which you've held credit is one of the factors that go into calculating your credit score. Closing your oldest credit card also raises your credit utilization ratio, which hampers your score.

Too many cards in too little time

While there are some conveniences if you maintain multiple cards, as discussed in the previous point, adding up your card collection too fast can have negative consequences as well.

Keep in mind that every time you apply for a new credit card, your credit score goes down by a few points. And if you go berserk and fire off too many applications for new credit cards over a short span of time, you'll invite suspicion from your would-be lenders, who might even reject your applications.

Report a stolen card in time

Sure, it's invariably safer to carry a credit card instead of a fat stack of cash on your person. However, it's always worth remembering that your card holds the key to a large amount of money, which, in the wrong hands, could deprive you of a significant chunk of change.

Should you lose your credit card, it's imperative that you get on a call with your card provider as soon as possible and notify them of the theft. As soon as you've done so, you'll no longer be liable for any fraudulent charge made using your stolen card. However, every second you waste in reporting the loss buys valuable time for any would-be miscreants.

Don't take it to the max

We've all been in situations where the urge to splurge is high. Spend too much and you end up with a maxed-out credit limit. When this happens, your credit utilization ratio goes up and your credit score goes down!

And if you do it often and struggle to pay it back, it's likely that you're spending beyond your means. But if you're able to pay it back just fine, then perhaps, it's time to talk to your card provider about raising your credit limit.

As we've discussed above, punctual credit card usage can improve your credit score. Similarly, one of the many benefits of timely repayments after you take an instant loan from mPokket is a boost to your CIBIL score. This is because we have always encouraged responsible borrowing and to that end, we also offer incentives such as mCoins and higher borrowing limits.

So why not give it a try? mPokket offers instant loans for students online as well as instant loans for salaried of up to Rs. 45,000. Simply download the app from Google Play Store, register with a handful of documents, and avail instant loans that are transferred directly into your bank account. No fuss, no muss!

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