While credit cards have become an important part of your day to day transactions and help you in many ways, there are certain things which can lead to problems, if you do not use your credit card wisely. In this blog, we will be discussing some of the risks of using credit cards and how to stay safe.
Having a credit card can lead to overspending, if you are the kind of person who cannot control yourself from splurging. The primary feature of credit cards which let users spend now and pay later encourages them to buy and consume more. The credit card companies also provide a number of offers such as discounts and cash backs to encourage users to spend more using the credit card. As a result of all this, you end up spending more than what you are supposed to spend.
You can avoid overspending by maintaining strict financial discipline. You should make a budget and spend according to it. In case you are spending more with your credit card, stop carrying it with you when you go out.
Credit card transactions are just like availing a loan. In case you miss paying your credit card bills on time, it will affect your credit score. Credit bureaus record every late payment or a default in your credit report. Another factor which affects your credit score is High credit utilization ratio. Having a high credit utilization ratio will affect your credit score. Banks will think that you are credit hungry, if you have a high credit utilization ratio.
You should pay your credit card bills on time. In case you can't remember the due date, you can activate the automatic deduction facility from your bank account. If you do not want to enable automatic deduction facility, you can use "IndianMoney App" to set a reminder of the due date. Also, it is advisable to maintain the credit utilization ratio, less than 40%. In case your credit utilization ratio is more than 40%, ask your bank to increase the credit limit.
Fraudsters conduct fraudulent transactions using your credit card by stealing your card details through card skimming devices. Under card skimming, fraudsters use a small electronic device called a skimmer, to steal your card information. This generally happens when your card is inserted into electronic devices like POS (Point of Sale). Fraudsters also use techniques such as vishing and phishing to steal your card details.
You have to be very careful with your credit card to avoid fraud. Never give sensitive information such as credit card number, CVV, expiry date and OTP to anyone. Also, make sure your card is swiped in your presence. Before paying your bills go through the credit card statement. In case there are any fraudulent transactions, report it to the bank immediately. Also, develop the habit of checking your credit report very often as this helps in detecting identity theft.
You should pay your credit card bills on time. In case you miss paying your credit card bill on time you will be charged late payment fees and interest on the outstanding amount. Many people pay minimum balance due just to escape the late payment fees. But, this does not save you from paying interest on the outstanding balance. The interest charged on credit card ranges from 24% to 36% a year. If you withdraw cash using your credit card, you will be charged interest from the very next day.
Pay your entire credit card bills on time and make sure not to withdraw cash using your credit card. In case you fail to pay the entire credit card bill amount, ask your bank to convert your existing dues into EMIs.