5 Warning Signs of Incorrect Credit Card Usage

A credit card brings multiple benefits, but incorrect use of the card can lead to adverse impacts on your credit rating as well as financial health for a long time. Let’s get to know 5 warning signs of incorrect credit card usage.

Nowadays, applying for a credit card has become a necessity for many consumers for it gives maximum benefits and helps you financially. Disciplined credit card usage and payment of dues of the card can surely help to improve your borrower profile; however, if you have erratic repayment behaviour, it will affect your credit score. Also, this will cause a deterrent when you apply for a loan with any bank or financial institution in future. If you are a credit card user, you must be informed about the incorrect ways of using the card. Below are 5 warning signs that indicate you are using the card wrongly.

1. Paying Only Minimum Amount Due:

Most credit card users have a tendency to pay only the minimum amount due on the payment due date. In such cases, the credit card interest rates on the outstanding amount will keep on accruing. You may have to pay hefty financial charges. For instance, ICICI Bank charges interest on a credit card if the Total Amount Due is not paid by the payment due date, even if the Minimum Amount has been paid. This habit of paying the only minimum amount every recurring month could land you in a debt trap.

2. Making Cash Withdrawals Through ATMs:

As a credit card owner, you are informed about the cash withdrawal limit at the time of delivery of the card. ICICI Bank also mentions the withdrawal limit in the monthly credit card statement. Cash limit is the subset of credit limit, and it is usually NIL for the first 180 days from the date of card issuance. If you are withdrawing cash through ATM frequently, it will attract hefty financial charges. However, this should always be your last resort.

3. Using More Than The Credit Limit:

Every credit card comes with a credit limit that is a pre-defined purchase limit set by the bank on a particular card. If your credit utilization ratio is more than the credit limit, it can damage your credit score. To avoid this, make sure you restrict your overall credit card spends.

4. Not Utilizing Reward Points:

A credit card gives you the benefit of collecting reward points every time you make a purchase. These points are valid for a period of 1-2 years. It is always recommended to use the rewards points before their expiry date. You can either adjust them against your outstanding dues, or you can redeem points by purchasing any product or service. Make sure you keep track of terms and conditions related to your credit card reward points.

5. Failure To Plan Spends During The Interest-Free Period:

Failing to plan your credit card spends according to your card’s interest-free period can land you in financial trouble. When you do any credit card transaction during the interest-free (grace) period, it usually doesn’t attract any interest charges as long as you are paying the dues on time. The grace period can usually range from 18 to 48 days for ICICI Bank credit card users.