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Credit cards offer the ease of making
payments for all your purchases and pay for them later to the card issuer.
Credit card usage requires a certain set of disciplines without which you might
end up gathering debts on your card. If you are a defaulter or have made some
of the credit card mistakes and did not know how to rectify, we offer you some
help.
Credit
Card Defaults
When you fail to pay the minimum due
balance on your credit card, you might be in trouble as it could damage your
credit score. The lenders will start sending you notices if there are
continuous defaults. You might be even asked to settle the account. If still
there is no response, the issuer can even close or write off your credit card account.
Paying off the debt could be the best
option to bring your credit health back to good shape. However, if you are debt
ridden and unable to pay off the entire debt, you can opt for settlement which
however will hurt your credit score.
Exceeding
Your Credit Limit
Credit utilisation ratio bears considerable
weightage on your credit score calculation. It is recommended to keep your
utilisation ratio below 50%. If you have exceeded your credit limit or used all
the credit available, the lenders might assume you are credit hungry and it can
also harm your credit score considerably.
By keeping tabs on your credit card
spending, you can keep your credit utilisation ratio low and increase your
credit score. Use your credit card the most at times when you do not have funds
in your savings account or to avail offers and discounts.
Applying
for Multiple Credit Cards
Applying for too many credit cards means
too many hard enquiries. If the applications are rejected, it could affect your
credit score negatively. Having too many cards also could become difficult to
keep a track on the payments.
The recommended course of action to
efficiently manage your credit cards is to use as many credit cards that you
can handle and avoid applying for multiple credit cards at the same time.
Not
Knowing the Terms
It is important to know the terms and
conditions put forth by the issuer before purchasing the credit card. For
example, the minimum payment due date, interest rates, ATM withdrawal charges,
reward points redemption might vary for different cards. Read the terms
carefully in order to avoid a sticky financial trouble later.
Incorrectly
Closing Your Credit Card Account
if you decide to close your credit card
account, see to that there is no outstanding balance to be paid. After making
the payment, get a ‘No Due Certificate’ from the card issuer. This way you can
keep your credit score intact.
If you settle the credit card payment or if
the lender writes off your account, it could hamper your credit score
considerably.
End
Note
While the credit cards offer a lot of
benefits to the users, it could also become detrimental to your finance if not
managed well. If you have already committed any of the above mistakes, it is
never too late to rectify it.