Avoid These 8 Common Credit Card Mistakes to Protect Your Credit Score

Credit card can be a great asset. Using a credit card is one of the best ways to build your credit score as well. But credit cards can be a great asset only if you use them correctly. If by chance you miss any payment then you will be charged a late fee. This will affect your credit score as well. You will always have to be on your toes to maintain a good credit score. Usually, you always have to maintain a credit score of 750. And if it drops then it will affect other areas as the credit score proves your creditworthiness. 

But do not worry as in this article we will be talking about how you can use your credit card correctly and we will also be discussing the major mistakes you should avoid making with your credit card. Now if you are someone who is using a credit card for the first time then you should be aware of these mistakes and not make them. Also, if you want to know about what are the things that you should do and take care of with a new credit card then refer to the article linked below. 

Read More: 5 Things To Do with a New Credit Card

On the other hand, if you have been using a credit card for a long time chances are you still must be making these mistakes. So make sure that you go through this article carefully, note down the important things, and make sure that you avoid making these mistakes which will eventually help you with building your credit score as well. So make sure that you stick around and read this article till the very end. 

Paying Annual Fees without Discussing with Customer Care

You can negotiate your credit card’s annual fee. There are a lot of people who are not even aware of the fact that the annual fee for their credit card can be negotiated. Also, you can negotiate all kinds of fees and this is the case with 70% of card issuers. So you always have to talk to the customer care executive before your renewal and you can request to remove the annual fee or even negotiate your annual fee, by doing this you will end up saving a lot of money. 

Also, there is a huge chance that the card issuers will remove your annual fee. So make sure that you talk to the customer care executive without fail. 

Not Increasing your Credit Limit

The second mistake which a lot of people make is not increasing their credit limit. But this is valid for people who can control their spending via their credit card. But if you are someone who can not control spending on your credit card then this one does not apply to you. It sounds strange to increase your credit limit. But if you are someone who has control over your credit limit then the credit limit does not matter to you much as you will be careful while spending your money. 

Let’s take an example to understand this better. So for example if you spend 20,000 every month and if your credit limit is rupees 50,000 then for twenty thousand the rate of utilization becomes 40%. But if you increase your credit limit and make it to 5 lakhs then now your utilization rate becomes only 4%. And if you compare then the 4% utilization rate is so much better than the 40% utilization rate for your credit score. So when you increase your credit limit your credit score eventually improves a lot that too for free. 

Not Upgrading Premium Credit Card after years

Premium credit cards are not given to new customers as these premium credit cards have higher limits and also because card issuers do not trust new customers with their premium credit cards. But you gain the trust of the credit card issuers when you use the credit card for quite a while like one to two years and maintain an absolutely clear track record by paying your credit card bills on time and by not missing any payment as well. 

So then you can ask your card issuer to upgrade your credit card by issuing you a premium one. And in most cases, the card issuers do upgrade your credit card as they see that you are responsible and you handle your credit card and you also pay bills on time. So you should always ask for upgrading your credit card. 

Not Using your Reward Points

Many credit cards offer rewards programs that let you earn points for every purchase you make. However, some people forget to use these points before they expire. If you don’t use your points before they expire, you’ll miss out on the benefits of the rewards program. In most cases, these reward points usually expire after a period of two to three years. 

When you earn reward points, check when they expire and make sure to use them before they do. This way, you can take full advantage of the rewards your credit card offers.

Paying only the Minimum Due

The fifth mistake that most people make is paying the Minimum Due. For paying your credit card bill you get two options. The first option is to pay the minimum due and the second option is to pay the entire bill. The reason behind many people choosing the minimum due option is that the minimum due amount is always less than the entire bill amount. This might feel convenient but it is not the best option to choose as the interest rate is charged on the remaining amount. 

Paying your bill via the minimum option turns out to be the biggest mistake as the interest rate charged on this pending amount is super high and is usually around 30 to 40% which is huge and you will end up paying a lot of money. On top of that, you will also be charged an extra penalty amount. So please try to pay your entire credit card bill on time. 

Closing your Old Credit Card

The sixth mistake that people make is closing their Old Credit Cards. What usually happens is whenever you get a new credit card many people close their old credit card. But this is not the wisest thing to do in fact this is one of the mistakes that many people make. One of the most important factors that determine your credit score is your credit history. So the longer your credit history the better your credit score. If you close an old credit card account, you’ll shorten your credit history and may lower your credit score.

So if you get a new credit card do not close your old credit card. Instead, you can convert it into a lifetime free card so that you can maintain it. This is the most important factor in determining your CIBIL score. So make sure that you do not close your old credit card. 

Over or Under Utilizing Your Credit Card Limit

The seventh mistake that people make is overutilizing or underutilising their credit card limit. Your credit card should be used on and around 1 to 30% of its limit. So even if you utilize it below 1% or even more than 30% this turns out to be bad. So it is super important for your credit score. So make sure that you make small spends and make your payments on time. 

Applying for Too Many Credit Cards Frequently

If you apply for too many credit cards at once, it can create an impression that you are not in control of your finances. This can affect your credit score and make it harder to get approved for loans. Also, it is advisable to not change your cards frequently. Instead, find a good credit card that meets your needs and use it for at least two to three years before upgrading.

Missing a Credit Card Payment

This is one of the biggest mistakes that you can make with your credit card. When you miss a payment this really affects your credit score a lot. In most cases when you miss a 30-day payment then your credit score might drop anywhere around 7 to 8 points. But when you miss a 90-day payment then your credit score drops a lot that is by 27 to 100 points. And when your credit score drops it creates a very bad reputation which will not work in your favor when you apply for loans. 

On top of that, you will also be charged with a penalty amount and you will end up paying a lot of unnecessary money. The solution to this is you can set an auto-pay which will help you make payments from time to time. 

Neglecting to Check or Review Your Billing Statement

The last mistake is not checking or reviewing your billing statement. It is very important to check your billing statement as it has detailed information on all of your transactions. So if you see any unusual or suspicious transaction then report it as soon as possible as this might be a fraudulent activity. 

Also, you should review the charges, and if there is any error then you can resolve it at the earliest. So make sure that you always check and review your billing statement properly and from time to time on a regular basis. 

So now that we have covered all the mistakes that you should avoid making. We hope that you have gained insights and you will note these mistakes and avoid making them which in turn will prove to be super beneficial for you.