A Credit Card is a powerful tool, but as Peter Parker’s uncle once said – “With great power, comes great responsibility”. In fact, this statement is really apt for Credit Cards, because when used responsibly, they can work wonders for you. But, if you abuse the power you exercise through them, they can land you in a soup.
The world has different kinds of Credit Cards users; not only in terms of their preferences but also in terms of their credit management sensibilities. And it is natural for each type of user to form his or her own opinion about the ‘right way’ to use a Credit Card.
Keep in mind, though, that many users who think they’re sailing through life by swiping away without worry actually have no idea what they’re in for. And the worst part is that their confidence encourages them to give advice to novice Credit Card users about how they think someone should use their card. And this can often be disastrous advice.
To help you steer clear of bad advice, we’ve listed the most common ones you’re likely to hear that are best left ignored.
The more cards you have, the better your Credit Score will be
The prime reason why people go by this advice is that it does help your Credit Score by bringing your credit utilisation ratio down. The flipside, though, is often taken for granted. The more Credit Cards you own, the more likely you are to fall into deep debt traps. If you’re considering another Credit Card to help you deal with your existing debt, just imagine the extent of damage two, three or even five Credit Cards can do to you!
Do note that we’re not completely booing the idea of owning multiple cards. It is totally okay as long as you play your cards right, pun intended! By this, we mean, your credit management game, as well as income level, needs to be good enough to handle multiple cards. If you take up more than you can handle, chances are you’ll land in deep trouble.
All Credit Cards are the same; just pick any!
We can’t begin to explain how wrong this piece of advice is. It is imperative that you do a good amount of research before choosing the right Credit Card for you. Today’s market offers a wide range of specialised cards that offer their own set of benefits – this is why you need to really explore and pick one that actually suits your lifestyle and will make a difference to your spending ways.
If you just assume all cards are the same, you may be a traveller who’s stuck with a Credit Card that gives you less or absolutely no travel-related benefits. At the end of the day, it’s going to be a loss for you when you realise you could have just spent a few minutes looking for a Travel Credit Card that came preloaded with exciting benefits for Frequent Flyers.
Additional Reading: How To Choose The Best Credit Card For You
Just do minimum payments – don’t worry about your full balance!
A lot of Credit Card users find small-time comfort in opting for minimum card payments without noticing a monster rising – the interest rate! While minimum payments are fine if your total due is not a very huge amount, choosing the lowest payment option when you have a big Credit Card bill can make it very difficult for you to clear your bill, thanks to interest being added to your outstanding.
Additional Reading: 5 Things To Know For First-Time Credit Card Users
To avoid this, you can make sure to clear your Credit Card bills in total every month; sort the payments as early as you can – this way you’ll keep that interest monster in check and also keep your expenses in check!
Once in a while, it’s okay to pay your Credit Card bill late
Just because one late payment won’t land you in trouble, it doesn’t mean it won’t encourage you to do the same in the future. Although the once-in-a-while late payment due to unforeseen circumstances is still okay, they become a real problem when they become a part of your repayment habit. Do not seek comfort in keeping your cash with you and not paying your bill; you’ll only make it worse.
Additional Reading: How To Correct A Late Payment Record On Your Credit Report
Not only will you need to pay a late fee, but you’ll also be harming your Credit Score and, thus, making lenders hesitant to offer you loans and other credit products in the future. Each late payment is updated in your credit report, so when lenders do an enquiry post your loan or Credit Card application, they may reject it if they find these late payment records.
The best way to completely avoid being in a situation where you’re considering skipping your bill payment is to always keep enough money to meet all your monthly debts – it’s as simple as that.
Additional Reading: 10 Credit Card Commandments You Ought To Follow
Now that you know what kind of advice you don’t need, go and master the art of using your Credit Card; the rewards are worth it!