Congratulations on your first credit card! A credit card can be a helpful financial tool if used correctly but if not, it will lead you to a never-ending debt cycle. To help you better manage your finance, we’re sharing 6 common mistakes first-time credit card users make.
Mistake #1: Ignoring the fine print in the credit card agreement.
Upon accepting a credit card, you are also agreeing to the terms and conditions in your credit card agreement. It usually contains the following details:
- Services available for the cardholder i.e.: balance transfer, cash advance, and flexible payment plan.
- Information on the interest rates, penalties, and other fees.
- Information on using your credit card in another country.
- Changes the credit card issuer can do to your account.
- Details on how to handle a lost credit card.
- How to close your account.
- Details on how the card’s minimum payments are calculated.
All of this information is crucial as it can help you make smarter decisions! Spend that 10 minutes to go through the agreement and be sure to seek clarification from your credit card issuer if you’re not clear on any part of the agreement.
Mistake #2: Failing to opt for a credit card that suits your finance
What are the factors you consider before signing up for a credit card?
If you didn’t weigh in your finance habits such as where you shop, how much you spend on average, and other crucial information like credit card fees and interest rates, you’re making a huge mistake!
Tons of credit cards today can cater to your lifestyle. Make sure you choose the right credit card. Click here to learn how to choose the credit card that suits your finance.
Mistake #3: Passing up benefits and perks
This relates to the previous point we’ve discussed. When you fail to opt for a credit card that suits your lifestyle, you cannot utilize your credit card perks to the max.
In some cases, one may already opt for a credit card that suits their lifestyle but have no idea what their card offers. We suggest you keep an eye on the latest promotions your credit card is offering so it can benefit you.
Check out CompareHero Credit Card page to compare all available credit cards in one go!
Mistake #4: Maxing out your credit card
Some people think signing up for a credit card means you now have access to ‘free money'. Let us clear this up: It's not free money and you have to pay every single cent that you spend using a credit card!
Maxing out your credit card also means that your utilization rate will be high, which can give a negative effect on your credit score. When your credit score is negatively impacted, it is not going to be easy for you to secure a loan.
Mistake #5: Making minimum payments
No matter what, make sure you make your credit card payment on time and in full as there will be negative consequences if you choose to make minimum payments or worse, to not pay at all.
“...at least, I'm paying…”
Hate to break it to you but this is how you start to cumulate interest and will end up paying more than you owe. According to Bank Negara, cardholders who pay their bills on time are rewarded with a lower interest rate, while people who miss their credit card payments will be charged a higher interest rate.
Mistake #6: Ignoring your credit card statement
Make it a habit to review your monthly credit card statement to ensure all charges are accurate and authorized. This simple habit will surely help you save money!
Credit card is a powerful financial tool if you manage them well and will change into a horror story if you live beyond your means. If you’re about to sign up for a credit card, read about the pros and cons as much as you can.