But being a credit cardholder, you are also expected to use it wisely and responsibly. Especially if you don’t want to end up in debt and with a bad credit rating. As a first-time credit card user, here are some of the things that you should avoid.
Your credit card is definitely not free money. Just keep in mind that you are borrowing from the money that you have yet to earn, so use it wisely and sparingly. If you don’t have cash with you, wait until you have it, especially if the purchase is not urgent and just a want, not a need.
Having multiple credit cards
If you don’t need more than one credit card, you certainly don’t need to have three or four in your wallet. It’s good to have various cashback credit cards because it helps build your credit. You can also avail of reward points and exclusive promotional offers. But it can also lead to poor credit management, especially if you have a lot of credit cards which you can swipe when you are tempted to go on a shopping spree.
Not understanding the terms and conditions
Every credit cardholder should know the credit card terms and conditions so that you can have control on your spending and pay for your credit card bills on time. Don’t be one of those people who will call the customer service hotline, demanding to have charges reversed when these fees come as part of your credit card requirements to begin with.
Take note of your monthly interest rates, as well as the annual fees that you will pay for after the first year. Read the fine print so that you will not be shocked when you make a late payment, or charge more than your credit card limit, or pay the annual fee on your second year.
Making late payments
Some credit cardholders will miss their due dates thinking that they can just make the payment when the next billing statement comes in. This is a bad habit to cultivate because increasing the amount of time to pay off your debt only accumulates your debts and increases the amount of interest which you need to settle. Be mindful of your due date and make your payments on time.
Maxing out your card
Not only is this dangerous when you’re just building your credit, you are also more likely to go over your credit limit. More finance charges and penalties will pile up, making it more challenging for you to clear your credit card debt.
When you only make minimum payments, you only pay for the interest and just a little of your actual card balance. Paying for the full credit card balance can take years, and even if you have the cash to do so, it will still be difficult to part with that amount of cash.
Not checking your billing statement
If you don’t check your billing statement, not only do you run the risk of missing your due date, you are also unable to check whether there are any fraudulent transactions on your account.
Always make it a habit to check the charges made on your credit card. Do not hesitate to call customer service if you see any suspicious activity on your card, too. The earlier you report it, the earlier an investigation can be launched, and the quicker the charges can be reversed, if any.
This article is contributed by iMoney Philippines, the leading financial comparison site in the country. Compare and apply for credit cards, personal loans, and other financial products in the comfort of your desk with just a few clicks.