Kolkata: A credit card is an important financial tool that many uses. It is a convenient method of payment, helps one track one’s expenses and also brings with it reward points and other benefits. However, one needs to avoid doing certain things when using a credit card to avoid paying high fees and charges. Here are 5 things you should never do with your credit card.
Not paying your credit card dues on time: There is an interest-free period after which the credit card dues need to be paid off. If you do not pay the outstanding amount by the due date you have slapped a late payment fee which could be Rs 500 or more. Post that you cannot use your credit card.
Paying only the minimum due: A credit card bill has a minimum due amount. Let us say your bill Rs 25,000, the minimum due amount could be Rs 7,000. You can pay the minimum due amount by the due date to avoid paying late payment charges. However, as soon as you make a minimum payment, you are getting into credit card debt. You will have to pay interest on the outstanding amount at a rate of 3- 3.5 per cent per month which could mean paying interest at up to 42 per cent per year. Once you do the minimum payment a few times, you get into a debt trap which is very difficult to come out of.
Maxing out your credit limit: Your credit card comes with a credit limit. That is the maximum amount you can spend on your credit card in a certain cycle. If not for an emergency, you should not utilise the full credit limit on your card. A high credit utilisation ratio means that you are in need of funds and that does not reflect well on your credit score.
Withdrawing cash on your credit card: You can use your credit card to withdraw cash from your ATM, just
like a debit card. However, it is something that you should avoid because of the high charges that are associated with it. Most banks will let you withdraw cash up to 20-40 per cent of your credit limit. But when you withdraw money using a credit card you are first charged a cash advance fee. This is 2.5 to 3 per cent of the amount withdrawn and is subject to a minimum amount of Rs 300 or Rs 500. The maximum amount could thus be higher. Then, there are the finance charges which are again in the range of 2.5 to 3.5 per cent per month. These charges are levied from the day you make the cash transaction to the day you make the payment in full. With all these charges, withdrawing cash on your credit card is a bad idea.
Revealing your card details: To round up, this is something you should avoid at all costs. The bank will never call you and ask for your credit card details. Such calls will be only for fraudulent people. Details like your credit card number and CVV should not be shared with anyone on the phone, whoever the caller claims to be. Also, store your credit card safely and report any fraudulent transaction immediately and block your card.