Mistakes You Often Make with Your Credit Card

A credit card is a great financier tool that allows you to make payments in credit with a grace period before you need to repay the amount.

However, mismanagement of your credit card can leave you in hot water. So, here are some common credit card mistakes and dangers to avoid from happening to you:

1. Spend Beyond Your Means

Only spent on what you need is easier said than done. The reality is there are too many temptations out there. Open your social media, ads are advertising you some stuff that you don’t need. Every month, there are new electronic gadgets or invitations from your friends for a fancy dinner or a night out.

All in all, countless things will lead to us overspending, especially when we know that we can pay first using our credit card. Now, this kind of usage with credit card is dangerous because we are spending on things that we did not budget into our monthly expenses.

Fun facts: It is different from when you choose to pay your loan or rent with your credit card through jomSETTLE Make Payment. Because your loan or rent payment was payments in your monthly expenses where you already have the cash for it. You use your credit card to pay for it to reserve your cash in hand longer in case of emergencies and to earn the reward points.

So, it is advised to also set aside an amount that you can spend monthly on the things that you want in your monthly expenses. With this, you can always keep track of the amount that you can afford to spend to buy that dress that you want or goes for a fancy dinner.

2. Making minimum payments without controlling your expenses

Making only the minimum payments monthly is the biggest mistake that majority of the people do. Paying only the minimum amount monthly will incur interest. These interests might seem nothing at first, but in the longer run, it will snowball into a huge amount.

To make things worse, you are continuing to spend on your credit card while making the minimum payment. This will turn into an endless cycle of payments where you keep repaying your credit card every month but will never be able to clear it off.

Sometimes it is fine to pay only the minimum payment due to certain situations you might in that time, but always spend diligently and make sure that you can pay your credit card outstanding in full.

3. Late or Missed Payment

Late or missed credit card payments can be bad. Your credit card issuer usually charges you an interest between 11% to 18% per annum. Additionally, when you missed a payment, the bank will flag you as a “bad payer” in their system, making it harder for you to apply for any loan in the future.

So, it is always advised to keep your credit card utilization rate low so that you will not overspend that will result in late payment.

According to CTOS, you should keep your credit utilization at least at a 30% max. Let’s say you have a total credit of RM20,000 altogether, you should not use more than RM6,000 at once. Hence, you should maintain your credit utilization max at RM6,000.

4. Neglecting to review your billing statements

This may look like a small matter but believe me, 80% of credit card holders do not do that. The majority of us tend to only look at the outstanding amount and minimum amount. It is good to have the habit to double-check and verify the accuracy of every transaction reported on your bill.

This way, you can take immediate action if there is fraud or misreporting. At the very least, you should review the monthly report to ensure that no errors on your credit card statement.

Plus, your billing statement gives you an idea of your current spending habit and any recurring payment. Hence, you can plan and prepare for the upcoming payment ahead.

Conclusion

There is no perfection in managing our credit card. Is okay if you make the mistake once in a while but do not let it become a habit. When used correctly, your credit card will become one of the most powerful financier tools.

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