3 minute read.
There are some definite advantages to having a credit card, especially when online shopping or in an emergency where a little backup is needed. However, it pays to be fully across the ins and outs of this little plastic (or digital) card to help you manage your finances.
Let’s look at some of the most common mistakes around credit cards to avoid.
Common mistake 1. Making only minimum repayments.
Making the minimum repayment can be an attractive option especially when budgets are tight. However, taking this approach can quickly spiral out of control as interest quickly adds up on the remaining amount owed, making it longer for you to pay off your balance. That is why you should try to pay more than the minimum so that your balance is paid off sooner and at a lower cost.
Common mistake 2. Ignoring your monthly statement.
If you don’t read your credit card statement you risk missing the payment due date and any important announcements about changes to your credit card terms. Making a conscious effort to review this statement each month is a healthy habit to get into as it enables you to stay on top of your debt, highlights your past purchases and may also help you detect any unusual activity.
Common mistake 3. Paying late.
You must be aware when your credit card payment is due to avoid any unnecessary late fees and a potential ‘black mark’ against your credit report. Placing a reminder on your phone or setting up a direct debit can mean the difference between a healthy and unhealthy credit score and also save you a lot of money along the way.
Common mistake 4. Taking cash advances.
Sometimes it is necessary to visit an ATM and withdraw cash from your credit card, especially in an emergency. However, you need to keep in mind that this can be an expensive way to access funds as interest is charged from the day you make the withdrawal.
One way to avoid a cash advance is to set up a separate account with at least four months savings so you have the funds there if you need them. The Defence Bank Foundation Credit Card does not charge a higher interest rate for cash advances which helps you save even more.
Common mistake 5. Waiting to report your lost or stolen credit card.
The longer it takes to report a lost or stolen card, the longer someone else has to make purchases. Even in situations where you may not be certain that your card has been stolen but misplaced, you should report it immediately and a temporary block will be applied until it is found. It is always better to be safe than sorry.
Tip: You can report your card lost or stolen through the Defence Bank app.
Note: If you delay reporting the loss or theft of your credit card you may be liable for any losses incurred.
Common mistake 6. Not understanding how your credit card works.
Always take the time to read and understand your credit card contract. Does your credit card offer an interest-free period like ‘up to 55 days interest-free’? If so, understand how that works. It is also important that you have a grasp on the different types of transactions available like cash advances versus a standard transaction. Knowing the ins and outs of your card will help you better manage your spending and develop good credit card habits.