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.
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.