Credit cards are popular, mainly due to the convenience they offer for payments. Using credit cards allows you to make small or large purchases without the need to carry cash around.
While there are numerous advantages, they can also lead you down a costly path, giving you an easy and convenient way to buy goods that you can’t actually afford to repay. This is only one of the numerous credit card traps you need to beware of when you’re looking to sign up for a credit card.
Here are 5 credit card traps you need to beware of:
Paying the bare minimum
Making minimum repayments means that you don’t cover your interest payments and you essentially end up paying more interest overall. Ideally, you should pay the balance in full each month.
Depending on how you use your credit card, your card issuer can charge you various fees. Fees may be charged for anything from exceeding your credit limit, late payment of your monthly statement to replacing a lost card. When you sign your contract, make sure that you fully understand the terms and fees that apply.
Hiked interest rates
Credit companies can increase your interest rate on your existing balance if you miss two consecutive payments. Increases may be due to your behaviour or simply as a way to raise more revenue.
Using your credit card often may lead to impulsive buying. It’s always better to opt for carrying cash of you feel that you might end up overspending. Be clear about why you are getting a credit card in the first place and make sure that you don’t use it recklessly.
Watch your limit
It’s always advisable to have your credit card limit set to one that you can manage. It’s important to be realistic about your ability to pay the balance each month.