Credit Card: The Most Important Don’ts You Need to Care About

According to finance investment companies in Delhi, India the credit card is a very important money tool. And yet, many do not care to know the benefits of this financial instrument, especially the young adults. Nearly 70% of the crowd prefers a debit card over credit card. However, a blind refusal to the usage of credit cards can hurt your long term wealth.

When used correctly, credit cards can dramatically help you support the growth and sustenance of your wealth. Firstly, on time bill payments will provide you with a good score making you to pay less when it comes to borrowing money for a house or a vehicle. In addition to this rewards like cash back rebates, frequent flyer miles and other offers add tremendous value to your spending. Also, in case of an illegal hacking, stolen credit cards are much easier to remedy than debit cards.

To make the most out of your credit cards, and avoid dismissing them out of fear, here are some important credit card Do’s & Don’ts.

Never Use a Credit Card to Withdraw Money:

The cost for withdrawing cash with a credit card is very high, so this should be a total “no-no” for you. The interest rate on a cash withdrawal is generally above 25% and this is on top of a fee that is usually around 3% of the amount you withdraw. In addition to this, you will also start accruing interest from the day the withdrawal is made and you can’t avoid it even if you clear your balance in full each month.

Avoid Using a Credit Card Cheque:

Credit card cheques may seem straightforward and convenient and a means of paying for something when you don’t have cash and you can’t use your card. However, they are treated like cash withdrawals so the same higher interest rate and the absence of an interest-free period apply. Moreover, purchases made under a credit card are covered under some government law which means that the card issuer is jointly liable so if the retailer goes bust, you can claim refund from your credit card issuer. But the purchases made using a credit card cheque are not covered by this clause.

Stop Using Your Card For Dual Purposes:

Most card providers use a payment hierarchy where the cheapest debt is paid off first. Therefore you should only use your card for one purpose unless the same rate is charged for both balance transfers and purchases. What many users do is keep using credit cards with a much shorter 0% offer on purchases than balance transfers and then be very comfortable with the spending. For example, if a particular credit card offers 16 months at 0% on balance transfers, also offers three months 0% on purchases. So, you’ll start accruing interest on your purchases as soon as the three months offer ends and won’t be able to pay that back until the balance you transferred is paid off in full. Hence, if you want to keep spending while continuing to pay an existing debt you’ll need a card with an equal 0% period on purchases and transfers.

Always Stay Within Your Credit Limits:

Every credit card comes with a credit limit which is why it’s important to monitor what you owe on your card because if you exceed the credit limit, not only will your account be blocked but you will also be charged a penalty. However, if you feel that your credit limit is low you can usually apply to have it changed once you have held a card for six months.

Never Fail to Make a Payment:

Failure to make even the least monthly payment will only hit you with a late/missed payment charge. According to finance investment companies in Delhi, India in some cases even the use of your credit card may be suspended. And, any late payment that shows up on your credit profile will harm your chances of gaining any type of credit in future.  So make sure that you never fail to pay at least the minimum bill every month.