The festive season is the most joyful time of the year, as it is a long-awaited occasion to make big purchases. Festivals bring time to increase consumer spending in most households. Large e-commerce companies like Amazon and Flipkart offer festive sales with heavy discounts to attract millions of people. Therefore, every festive season witnesses a spike in credit card usage for spending and discounts.
To maximize the benefits of credit cards, it’s recommended to avoid certain mistakes during this festive season. These mistakes, if repeated and not improved, can lead to a drastic fall in your credit score and diminish the chances of your loan approval in future. Therefore, if you are unaware of your credit score and want to check it for free, you can visit Paisabazaar’s online and web platforms and receive monthly updates in your preferred language.
With the help of your credit report, you can have a thorough analysis of your credit health and improve your creditworthiness by following the suggested measures from Paisabazaar’s exclusive Credit Advisory services.
Further, let’s learn about eight credit card mistakes that can be avoided during this upcoming festival season to keep your wallet and debt balance intact.
Overspending on Your Credit Card
Irrespective of your wish and desire, do not overuse or overspend your credit card during the festive season. Do not shop without a budget, as you might be unable to repay it later. Overspending also leads to an increase in your Credit Utilization Ratio (CUR), which is the percentage of credit limit usage from the total assigned limit. Having higher credit utilization regularly can also leads to a gradual dip in your credit score as it shows your overdependence on credit.
Missing on Payments
It would help if you always strived to repay the credit card EMIs in time to avoid penalties. Set up payment reminders in the form of auto-pay or Standing Instructions (SI) with the bank so that the EMI is automatically deducted from your savings or current account.
Ignoring the Interest Rates
Ensure that your credit card EMIs are paid on time. If not, check the credit card interest rates, as high outstanding balances can lead to significant interest charges that can range from 2.5% to 3.5% per month. The interest rates charged on the outstanding balance vary from bank to bank.
Also, when opting for EMIs, you should look for No-cost EMI options instead of those with high interest rates, as you would end up paying a lot to cover the interest amount.
Getting New Retail Credit Cards only for Discounts
Do not opt for new credit cards just to avail discounts offered by retailers or e-commerce companies. These cards might become a burden on your finances, if not utilized regularly. Getting multiple credit cards issued in a short span just for shopping purposes can lead to a drop in your credit score, as it shall be considered as a hard inquiry with the credit bureau.
Availing Cash Advance
Credit card institutions offer cash advances at an interest rate of 3%-5% on the total availed advance in addition to a high Annual Percentage Rate (APR) of 25% or more. You are also charged a hefty cash advance fee at the time of withdrawal. Avail cash advance only when it is extremely necessary to do so and you have exhausted all other options.
Not Reading Terms and Conditions
Before applying for any credit card, thoroughly review all the terms and conditions, such as joining and annual renewal fees, interest rates, rewards structure, redemption policies, or any other hidden charges.
Neglecting Cashback & Rewards
Multiple credit cards come with exclusive cashback options and multiple rewards in the form of points, shopping discounts, no-cost EMI benefits, and much more. Users neglecting these benefits can miss out on various shopping benefits.
Failing to Monitor Transactions
Consumers should always keep a check on their monthly credit card statements for any unauthorized charges or errors. Failing to do so can result in paying an extra amount for transactions with incorrect values or inaccuracies.
Useful Information
Most importantly, while doing any type of online transaction, you should protect your personal and credit information to avoid any fraudulent activity. You should be well aware of the source before sharing your credit card information, as you might not know whether you might become a victim of fraud. You must not share your credit card information over the call or at any social media platform, and must not click on links provided by unknown or less familiar shopping websites. Finally yet importantly, do not share your credit card details or CVV number with anyone to avoid fake or fraudulent transactions.
