1.Applying for a credit card

Remember, “credit card” is not “free money”. It is the “most expensive loan ever”

Think carefully, do you really need it. Instead use a “debit card” It is least expensive and it will keep you disciplined while spending money as you can only spend if you have money in your bank account.

2. Not bothering to check the monthly credit card statement

The credit card monthly statement gives details of every transaction you have made. There are chances of error and extra charges in that statement. You will end up paying more, if you fail to check every item in the statement.

3. Paying only the “minimum amount due” every month

This is the single biggest and costliest mistake people make. Interest rate on the balance unpaid amount is between 24 % p.a. to 36 % p.a. You will be paying through your nose if you pay only the “minimum amount due” every month. As the balance unpaid amount will compound every month, you will pay this “Exorbitant” interest rate on the compounded balance.

4.Paying “Late” every month

If you pay after the “due date” mentioned in the statement, you pay a delayed interest charge of between 24% p.a. to 36% p.a. for the number of days you delayed. Is it worth delaying the payment, since you anyway to pay, sooner or later?

5. Giving credit card to “family and friends” to spend

Another big mistake, remember, you are responsible for every rupee that your family and friends spend on your credit card. You will have to pay the money back, irrespective whether your family and friends pay you or not.

6.Applying for multiple credit cards

It is as if one monster is not good enough that you are inviting another. Multiple credit cards mean more debt and more debt means more trouble, if you cannot track it properly OR cannot pay/forget to pay on time.

7. Not reporting lost or stolen card on time

Any liability arising if some one uses your card is yours. You have to pay the money back else if you delay, the “exorbitant” interest rate is charged.

Your liability stops the moment, you report the fact that either you misplaced the card OR some one stole it. Ensure that you have record of the conversation by insisting on a reference number, when you call the bank to report this. A safer way is to report it in writing by sending an email/letter as well, to keep a record of this.

8.Using credit card abroad

Using your card abroad for transactions in foreign currency means paying more by way of higher currency conversion as well as transaction charges. Your loss will be anywhere from 3% to 8% on the amount you spend. So, think carefully before you do that.

Another risk is what happens if you lose OR if some one steals your credit card, when you are abroad and makes purchases, who will pay?

9.Using credit card to with draw cash at ATMs.

Sure, if you don’t mind paying extra charges between 2% to 5% of the amount you withdraw, then go ahead and do that. Don’t forget this is a “Credit” NOT a “Debit” card.

Be smart, use your “Debit” card instead to with draw cash with out paying anything.

10.Using the full credit card limit given to you

Credit card companies, intentionally give a higher credit limit, to encourage you to spend all your money. But, remember the more you are closer to your limit the lesser will be your credit score (as you are most likely to default sooner or later).

As a thumb rule, you should not spend more than 20% of the credit limit assigned to you.

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