A credit card, issued by banks or financial institutions, is a financial product or a payment card that gives one freedom of cash along with interest-free credit.
It is one of the most convenient ways of borrowing a small sum, without paying interest if returned within the grace period. It brings a lot of rewards and packages for the user along with itself being of great importance and convenience when used correctly.
Some of the bad habits related to the usage of credit cards are given below:
- Getting lured by Incentives and offers:
- Forgetting to keep a record of expenses
- Reward points:
- Not paying the minimum
- Carrying a balance to build your credit score
- Paying late
- Shopping to be happy.
- Not Reading Your Credit Card Statements
- Pulling out Your Credit Card all the time.
- Habitually Paying Your Credit Card Late
- Transferring Balances to Avoid Payments
- Taking out Cash Advances
- Applying for New Credit Cards You Don’t Need
- Buying Things You Can’t Afford
- Letting Credit Cards Go Unused
- Not monitoring your credit score and report
- Accepting promotional credit offers and then forgetting about them
- Not keeping your receipts
- Opening and closing multiple cards
Using a credit card now, purchasing things, and paying for the purchases later is one of the biggest advantages of a credit card.
If in an emergency, one can have easy access to the funds required without any time lag, which is one of the biggest advantages of using a credit card.
But this makes you spendthrift if not done in the right manner. You may end up spending more than your allowances.
Getting lured by Incentives and offers:
Credit card companies often give attractive offers and incentives to their customers. It may include special coupons for specific stores, discounts, etc.
Each time you swipe your credit card, you get rewards in the form of cash backs or air miles which can be redeemed anytime or can be used in paying dues of the card.
Companies also provide sign-on bonuses which may be at times very attractive. But these incentives and offers often tend to make you forget that you are running short on money. Ultimately, you will have to spend your money to get these offers.
Forgetting to keep a record of expenses
Each purchase made with a credit card is recorded and a detailed monthly statement is sent which helps one track all the expenses made in a month, thereby helping one create a monthly or yearly budget and cutting down on the expenses that are not very important thereby saving money.
Users also receive a message after every swipe about their outstanding on the card and the amount of credit available to them. But even with these facilities a lot of people fail to keep a record of expenses. They end up dealing with financial instability.
With every swipe, one gets some reward points that can be used in spending like restaurants, groceries, gasoline, etc. if you reach your threshold, points can be redeemed.
Reward points are one of the ways by which credit card companies use to make their customers spend more.
Many times, reward points can be converted into cash, which can be an added advantage for making all the swipes. But these reward points can get you addicted to spending more often. You will keep spending more to reach the limit of the reward point.
Not paying the minimum
It is suggested that if you carry a balance on credit cards, make an effort to pay it off before you use your cards again. It’s much easier to make the minimum payment than to figure if and how much extra you can afford to put toward your credit card bill.
Carrying a balance to build your credit score
Often people carry monthly balances because they think it will help build their credit scores.
In reality, doing this comes with added interest expense and no real improvement in your credit score
Paying your credit card dues on time is important. Because late payments will adversely affect your credit score.
Shopping to be happy.
Shopping can release endorphins in the brain. But unfortunately, spending money to feel good can become addictive. And those feel-good purchases you rack up could become hard to pay off. This will eventually hike your credit score.
Not Reading Your Credit Card Statements
With lots of different bills coming in the mail or arriving through email. It can become overwhelming every month. Reading and reviewing each of them can be mind-numbingly boring, not to mention time-consuming.
Some you can get by with a skim reading, but there are benefits to fully reading your credit card statement. It is one of the best ways to catch unauthorized charges and billing errors.
Pulling out Your Credit Card all the time.
Unless you’re using your credit card to rack up rewards and you pay off your credit card balance every month, you shouldn’t opt to use your credit card over your debit card.
Your debit card is your direct access to the funds you should use for everyday purchases, like groceries, gas, clothing, and other expenses.
If you use your credit card, it should be a conscious decision with a concrete plan for paying off what you’re charging.
Habitually Paying Your Credit Card Late
You can schedule your credit card payment days in advance. There’s no excuse for habitually late payments. If you constantly forget to send your credit card payments, you need a system to get rid of this bad habit and start paying your credit card on time.
Paying on time saves you money in late fees and higher interest rates. Plus, it protects your credit from the effects of late payment.
Transferring Balances to Avoid Payments
If you’re constantly chasing balance transfer promotions to avoid paying payments on your credit card, you’re engaging in a bad habit that could hurt you in the long run.
Balance transfers typically have fees that will increase your overall balance if you’re never making payments toward the transfer.
And if you’re making purchases on the card with a balance transfer promotion, you’re compounding the problem.
Taking out Cash Advances
Cash advances are one of the most expensive types of credit card transactions. They typically have the highest interest rate, and they don’t have a grace period, so you start being charged interest right away.
On top of that, you have to pay a cash advance fee each time you use your credit card to get cash. Your credit cards should never be a source of cash, so if you’ve fallen into this habit, stop right away.
Applying for New Credit Cards You Don’t Need
Low-interest rate promotions and sign-up bonuses are so inviting. You may sign up for every new promotion that’s offered, even if you already have enough credit cards. It’s a slippery slope.
Not only can new credit card applications hurt your credit score, but they can also create an opportunity to get into debt.
One month you’re handling your credit cards well and then a few credit cards later, you’re in over your head.
Buying Things You Can’t Afford
Next to habitually making late payments, this is arguably the worst credit card habit to have, and how you get into debt. If there are things you want but can’t afford to pay for them, you should wait to purchase them until you can afford them.
The satisfaction you get from having things now won’t comfort you when you are dealing with the debt you created to get those things. Before you swipe for a purchase, always assess whether you can truly afford it.
Letting Credit Cards Go Unused
In a way, not using your credit cards can be just as bad as using them too much. If your credit cards go dormant for too long, many credit scoring formulas disregard them in your credit score.
On top of that, your credit card issuer may cancel your credit card after you haven’t used it for several months. Use your credit cards at least once every three to six months to keep them active.
Not monitoring your credit score and report
As a consumer, you need to check both your credit scores and credit reports regularly.
Monitoring both can help you fix any issues that come up from missed bills or fraudulent activity.
Accepting promotional credit offers and then forgetting about them
Many card issuers entice consumers with offers of 0% interest for up to 18 months or more.
So when you have, say, 18 months to pay off a debt you might make only the minimum payment each month and plan to deal with the rest later.
Then, 18 months fly by and you haven’t paid off the debt.
Not keeping your receipts
If you don’t keep your receipts, you can’t compare them with your credit card statements to see if you’ve been charged for something you didn’t buy.
Opening and closing multiple cards
The longer you have a credit card account, the more valuable it is in credit score calculation. If you apply for a credit card just for the sake of having it, your credit score could take a temporary dip from that hard inquiry.