4 Common Credit Card Mistakes To Avoid-UAE-Dubai
Well, we all study maths in school and if you take up commerce in college, you will learn the nitty-gritty of accounting too. If you study further and do a post graduation in finance like MBA, you learn to analyse and interpret financial statements. But we never get to learn or we are never taught to manage our personal finances. I believe every college should introduce this subject because it is so very imperative. But we learn to manage our finances on our own. Saving and managing the money that we have earned doesn’t come easy. We try, experiment, burn our fingers and then we learn a lesson or two. But at times we find ourselves in a debt spiral which is hard to get out off.
It applies to credit cards also. Once we get our hands on our first credit card, we do not know what to do and what not to do. We go on swiping it as if there is no tomorrow. Credit card companies are not non-profit organizations. They need to make a profit to survive and our ignorance or irresponsible spending and managing our credit card works to their advantage.
Having said that, we can make the best use of our credit card/cards if we pay a little attention and take time to learn.
4 Common Credit Card Mistakes To Avoid:
1. Credit Card Interest:
You will be charged an interest on your outstanding balance on your credit card. You will have a balance only when you do not pay your credit card bill in full every month. Credit card companies give you this option of making a minimum payment on your outstanding balance, usually 4-5%. But this provision can put you in trouble as the outstanding balance keeps accumulating and you also have to pay an interest on that amount. Most of the time, we are ignorant of the percentage of interest charged on our credit card. Understand that you will not be charged any interest if you pay your credit card bill in full. Also understand that, if you take a cash advance, the rate of interest on this advance would be different, mostly higher than the normal rate. Try and read the blue print before you venture into carrying a balance or taking a cash advance.
2. Credit Limit:
There is a limit to the amount that you can spend via your credit card. UAE provides lot of avenues for you to swipe your credit card and splurge but that doesn’t mean that you reel out of control and go on spending cause you don’t have to pay the amount immediately. A little forethought before you put that next charge on your credit card can help you to step back and analyse if you really need that item. Maxing out your credit card can put you in trouble and you might find yourself unable to pay that amount in full. Maxing out your credit card also affects your credit rating as it indicates that you are a spend thrift and do not know to manage your finances. This can be a red flag and can send wrong signals to your credit card issuer. Al Etihad Credit Bureau maintains your credit history. Missing out on credit card payments can badly affect your future needs of credit in UAE.
So, know your credit limit and it is said that, keeping your utilization ratio below 30% is ideal.
3. Late Payments
It is easy to miss credit card payments than to build a pristine credit history. Now that Al Etihad Credit Bureau is in picture, do not take your credit history for granted. Finance is the life blood and you will never know when you have to borrow from a bank or a credit institution in UAE. Banks and credit companies will have access to your credit history reports. If you have a bad credit history, your chances of getting a loan or capital are drastically affected. Banks provide you a grace period beyond due date to make your credit card payment. But there is a late payment fee that you need to know. Best thing, take advantage of the free loan and pay your credit card in full.
4. Credit Card Statement
Credit card is like a report card of your spending through the credit cycle. You can easily get your credit card statement from your online credit card account and it takes few minutes to scan through the expenses. This small exercise can save you lot of trouble. Fraudulent credit card charges can easily creep in. If there is a charge which you think is not made by you, you can immediately notify the bank and get things cleared. And again, a credit card statement serves as a budgeting tool. You will know exactly how much you have spent and what are the unnecessary purchases you have made. This concise record of your spending can help you to cut down your spending and also help you to make a plan to repay the debt, if any.
Credit cards are great. You don’t need to carry a wad of cash and also credit cards are accepted everywhere in UAE. But do not take this power tool for granted which has the capability of pushing you in a debt spiral. Develop a habit to pay your credit card bill in full and also take full advantage of rewards and points that the card offers. Take it as a means of convenience and not a spigot of cash.