4 Common Credit Card Mistakes & Ways to Avoid

The principle of buying now and paying later is what defines a Credit Card. Whether you opt for the ICICI Bank credit card, or from any other bank, the fundamental way in which such a card works, remains the same. The only difference with the ICICI Bank Credit Card payment is that you can access a host of benefits that make your usage more rewarding. Ensure that you avoid these mistakes mentioned below when you get a Credit Card.

1. Using a Credit Card for Withdrawing Money

When you withdraw cash using a Credit Card, an advance withdrawal fee of up to 3.5% on the amount withdrawn is charged. This amount is charged right from the day one withdraws this cash until the date of repayment. Depending on your card, the finance charges on credit can go as high as 49.36%. Hence, unless you want to burn a hole in your pocket, withdrawing money using a Credit Card isn’t recommended. Repayment is usually not made for a prolonged period. Hence, it is crucial to ensure you repay the entire amount withdrawn soon.

2. Repaying the Minimum Amount Due Repeatedly 

Since you are unable to pay off the full amount, you may be tempted to go ahead and repay the minimum amount due. The widespread assumption is that paying off this minimum amount will not attract any charges. Contrary to widespread belief, by paying the minimum amount due, you only save on incurring a late payment charge. Interest would still be accrued on the remainder of the outstanding credit amount. By continually paying the minimum amount, you are likely to land in a debt trap. Outstanding dues will keep piling up, as will hefty charges. 

Attempts should be made to repay your Credit Card charges on time, in full. If you face difficulties in doing that, you can choose to convert the outstanding credit amount into easily payable EMIs. You can also get any big-ticket expenditures converted into EMIs. Also, try transferring the outstanding balance to a separate Credit Card, so you can lower or nullify the interest rate on it. You can also avail a personal loan to make use of debt consolidation at reduced rates of interest. 

3. Regularly Keeping Your Credit Utilisation Ratio Above 30%

Since Credit Card issuers and lenders typically consider a credit utilisation ratio above 30% as credit hungry, a credit bureau will reduce your credit score by a couple of points when this level is breached. It is vital to ensure that you contain your overall Credit Card expenditures within 30% of your overall credit limit. Let’s assume you breach the 30% mark frequently. In this case, you can either request your card issuer to grow your credit limit or you can opt for an additional card itself so you can increase your total card limit. Both these measures can bring down your credit utilisation ratio. 

4. Not Planning Your Card Spends as Per the ‘Interest-Free’ Credit Period

Whether you choose an ICICI Bank Credit Card or one from any other bank, every card has an interest-free period. A credit card’s interest-free period is the duration between the date the transaction was conducted and the date its payment is due. This can range anywhere from 20 days to 50 days, depending upon your card issuer. In this period, a Credit Card transaction will not attract interest, as long as it is repaid either on or prior to the due date. In other words, your card issuer freely finances card expenses during this period. Attempt to plan out your card expenses, especially the high-cost ones, in a way where you avail a large interest-free period for each expense. 

Conclusion

Your life decisions are important, especially what you choose to spend your money on. Owing to their wide-ranging benefits, Credit Cards are an essential financial instrument to have. Now, applying for a fresh Credit Card, especially when you choose the ICICI Bank Credit Card, is easier than ever. You simply need to make sure you fit all of ICICI Bank’s Credit Card eligibility criteria.

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