Credit card is a great instrument which if used correctly can help in many ways. From building good credit profile to acting as a funds back up in time of an exigency, the plastic in one’s pocket can be of great benefit. However, just like anything else under this sun, the cards also have a darker side. If not used properly, it can become anathema to the users.
Following is the list of five expenses that one must avoid for continued deriving of benefits from this otherwise great credit facility.
Any large expense that cannot be paid in one go
Credit cards give the holder a great convenience of buying now paying later. This leads missing on estimating the charges being made on the card. Since the credit limits extended on cards usually is in multiples of one’s monthly income, one is susceptible of undertaking large ticket transactions on these. While there is no harm in charging your card for a higher amount but the same has to be within the reach to get paid at the end of the billing cycle. Paying complete outstanding in one go will lead to saving on the interest to be paid on card.
Loan on card
The banks offer a convenient product called loan on phone, generally termed as LOP. Now while this loan is just a call or even a message away, availing of such loan may lead to denting one’s finances. This loan not only comes with a higher rate of interest that you may be able to seek other wise over a personal loan, even the processing fee is marginally higher. Also, the repayment term is shorter than a conventional loan which will lead to a higher equated monthly instalment. In case one is in need of a fund availing a personal loan or even a loan against gold will be a better option.
Spends made to earn reward points
On one hand while the card gives convenience it also rewards the users with various schemes. From discounts on variety of products to even free products, from points that could be redeemed to by air tickets to hotel bookings the reward programs offer varied benefits. A few cards even extend cash back. The important point to be kept in mind is that these programs are to be utilized as an additional benefit and spends on cards should not be undertaken to earn these points. This may lead to excess charge on the card that may not be paying in one go.
Over spending during sale
Marketers keep coming up with various tactics to lure the consumers. Sale is one of these. End of season sales do give good bargains and can help in saving money. However, over spend during the sale seasons can become a sour point. One should plan the purchase during such periods and should only charge the plastics for the amount that can be paid entirely in one go. Over spending not only leads to one revolving the credit but a higher usage of credit limit will also result in adverse impact on the credit score. You can check your CIBIL score to ascertain this fact so that you avoid such errors.
While the credit card gives you the option to withdraw a part of the prescribed limit in cash, this something that one must avoid. Only under a duress should one opt for this option. Any cash withdrawal not only attracts a very high processing fee and interest, it also leads to discontinuation of the interest free credit period. So if you have withdrawn cash, any outstanding will attract interest from the day of withdrawal and all future transactions will get levied with interest right from day one.
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