New Delhi. Credit card is definitely convenient, but a little carelessness can turn into huge loss. Using the card at the wrong place not only increases your debt but also brings down the CIBIL score. If your total credit limit is Rs 5 lakh and you have already spent Rs 4.5 lakh, then in this case the new expenditure will take your credit utilization rate to 90 percent. This is considered very bad from financial point of view. According to experts, credit utilization should not be above 30 percent. Repeatedly spending close to the limit reduces the CIBIL score and creates problems in getting loan approval or increasing the card limit in future. Therefore, in such a situation, the first step should be immediate payment of old dues, so that you remain in the safe financial zone.
Withdrawal of cash from ATM is the most expensive mistake
Withdrawal of money from ATM using credit card has become a habit of many people, but this is the most expensive mistake. Banks charge 2.5 to 3 percent cash advance on this and daily interest is also charged on it. The special thing is that there is no grace period in this. That means interest starts increasing from the day the money is withdrawn. Even after withdrawing only Rs 10,000, the amount may increase to Rs 10,400 or more after a month. This additional burden has a direct impact on your pocket and leads to increased debt in the long run.
Just trying to avoid paying the minimum due increases the debt.
Many people try to avoid tension by paying minimum due if they are not able to pay the full amount. But this option is the most dangerous, because the interest on the principal amount keeps increasing daily. For example, if your bill is Rs 50,000 and you have paid only Rs 5,000, interest will continue to accrue on the remaining Rs 45,000. Due to this, your debt can increase manifold over time and will not end for months. Therefore, it is better to postpone new expenses until full payment is possible.
Making big purchases without planning is a risky move.
If you are buying expensive gadgets, furniture or travel packages only on the basis of credit card and the payment plan is not clear, then it is a risky step. According to experts, make big purchases only if you have a backup or have arrangements to pay in the form of EMIs. Otherwise, a big one-time expense may hang over your head in the form of debt for a long time. The purpose of credit cards is convenience, not burden; Therefore, spend big expenses only after thinking.
Avoid payment on suspicious websites and unsafe URLs
It is very important to be cautious while making online payments. If a website is not secured with HTTPS, or its URL looks suspicious, then entering card details there can be a big risk. Such sites increase the risk of data theft, fraud and hacking. Many times cyber criminals trap consumers by creating fake sites. Therefore, do online shopping only on trusted and secure platforms, so that there is no financial loss.
Score falls due to late payment and penalty increases
If you have a habit of paying bills after the due date every month, then it is a big loss for you. Banks not only charge late fees and additional interest, but it also has a negative impact on your CIBIL score. Frequent late payments spoil your credit history, which can make it difficult to take a loan in future. So setting up auto-debit or keeping reminder alerts on is a financially safe move.
Risk of increasing card spend amid EMIs and other liabilities
If you are already burdened with personal loan, home loan or other EMIs, new expenses on credit cards will make your financial situation more stressful. In such times, using debit card or UPI is a better option, because with them you spend only as much as is available in your bank account. With this, there is no risk of increasing unnecessary debt and you maintain control over your budget planning.
Credit card will be beneficial if used wisely
Credit cards are a powerful financial tool when used properly. This not only makes spending easier, but also provides facilities like rewards, cashback and offers. But due to mistakes this card can cause problems. Therefore, always remember these four things – careful use of limit, timely payment, secure online transactions and controlled expenditure. Wise use keeps you away from debt and strengthens your financial life.
