6 Common credit card pitfalls to avoid if you are on a budget

Many people make mistakes when using credit cards.  We will review some of the common mistakes credit card holders make. Credit cards are convenient to use when traveling, or doing online shopping. If you avoid some of the credit card usage mistakes people make, you will be able to manage your finances better, and avoid high charges too.

Here are 6 Common credit card pitfalls to avoid if you are on a budget:

1. Cash advance withdrawals

Merchants do not charge you for shopping online or at their premises with the card. But when you withdraw cash from an ATM you will be charged a cash advance fee. This may be five percent of the amount you are withdrawing or even more. To avoid such charges, one should use the card at the point of sale, or for online shopping only. Withdrawing cash by using a credit card will attracts high interest rates and fees.

2. Maxing out the credit card

You should avoid maxing out your credit card too quickly. Most people are tempted to use their credit cards simply because they have a high credit limit. You should train yourself to stick to the budget. Your credit score depends on how best you manage your credit card balances. Some people spend a lot on their credit cards and end up paying only the minimum balance per month. This can affect your credit score. You also incur interest on the outstanding balance of the credit card.

3. Attractive rewards

Some people are influenced to take a credit card due to their status. The privileges and rewards that credit card issuers give their clients are paid for indirectly through high annual fees. Some of the issuers also charge joining fees. Before you get a credit card,   you should know the value of the credit card. You should also get a credit card if it is necessary

4. Failing to pay the outstanding balance

This is one of the reasons why many people avoid applying for a credit card. They fear the high-interest rates and late payment fees when one fails to pay on due date. But if you have financial discipline and stick to the budget, this should not be a problem.

5. Failure to budget

You should have a budget on how to spend the credit card limit. This can help you to avoid impulse buying. Living below your means helps you stay out of debt and this improves your credit score, financial fitness, and you enjoy more peace of mind.

6. Failure to check statements

You will find information about the minimum due and total outstanding balance of your credit card from the statements. In case of fraudulent transactions, you may claim for a refund from the merchant through your bank. In case of any merchant errors, you may also claim for a refund. You should go through your statements and verify that the transactions appearing on the statement are correct before you pay.

These are some of the pitfalls you should avoid when using a credit card. If used wisely, a credit card is a good financial tool that can help you manage your finances.