Credit cards can be a godsend or a curse in your life, depending on how you use them. Among other advantages, they can assist you in getting out of a financial bind when used sensibly and wisely. Using credit cards carelessly can trap you in a debt cycle that has high interest rates and other negative consequences. These are a few significant clues that someone might be abusing your credit card.
Credit card debt accumulation caused by merely making the minimum monthly payment
In most cases, american express platinum reserve credit card cardholders who are unable to pay their bills on time just pay the minimum amount owed. If cardholders pay only this small amount by the deadline, they can avoid incurring late payment fees on their account. Typically, the minimum payment is five percent of the entire debt. Financing charges are interest applied to the remaining balance on a credit card account; they can occasionally total 47–48 percent annually.
Furthermore, since paying the minimum amount due on your credit card debt can result in significant fees over time in the form of high finance charges, it may be a warning sign that you are about to fall into a debt trap.
If you are having difficulties paying off your american express platinum reserve credit card debt in full, you may want to think about options like transferring your credit card balance by applying and monitoring the status of your credit card application, having large purchases converted into EMIs, or converting the entire outstanding balance into EMIs.
To pay off your credit card debt, you might also think about selling your low-yielding investments. Using a secured loan, which won’t conflict with your long-term goals and has an interest rate much lower than credit card financing, is an alternative for leveraging your long-term investments. You should also maintain a credit utilisation rate of at least thirty percent.
You can see how much of your credit limit you have used up to that point by looking at this ratio. Because credit bureaus usually interpret credit utilisation ratios higher than 30% as indicators of credit hunger, try to stay within this spending range. If you cross this threshold, credit bureaus have the power to reduce your credit score by a few points. If this is greater than your credit utilisation ratio, you should apply for a new credit card, discuss raising your credit limit with your card issuer, and monitor the progress of your application. You can reduce your credit utilisation ratio if you don’t increase your spending after getting a credit card with a higher limit or another credit card.
Expiry of the interest-free period
Another wise american express platinum reserve credit card usage tactic that most cardholders ignore is making use of interest-free credit card periods. The time that passes between the date of the credit card transaction and the payment due date is known as the interest-free period. If you are able to pay off your entire balance within the allotted time, the credit card issuer will not charge interest on your transactions during this time. Generally speaking, depending on when your transactions are completed, this period lasts between eighteen and fifty-five days.
Schedule your largest credit card purchases for the start of your billing cycle to make the most of your interest-free days. If you take this action, you will be able to benefit fully from this interest-free period. If you have multiple credit cards with different due dates, the bulk of your transactions should happen at the start of each credit card’s payment cycle. Apply for a different credit card with a longer interest-free period if the issuer of your current credit card offers a shorter term or declines to modify or extend it. You can monitor the progress of your credit card application during the approval process.
Obtaining cash from an ATM by using a credit card
One mistake that people make frequently is withdrawing cash from credit card accounts. Such withdrawals are subject to finance charges from the time of the withdrawal until the date of the money’s repayment, in addition to a cash advance fee of up to 2.5–3.5 percent of the withdrawn amount. Therefore, using a credit card to withdraw cash should only be done as a last resort. In addition, in order to avoid financing and cash advance fees, make sure you return the full amount borrowed as soon as possible if this happens to you.
Causing your reward points to be lost.
You must track your reward points using the same procedure that you use to check the status of your credit card application: either visit the application’s website or get in touch with customer service.
When marketing their products, credit card issuers highlight the availability of rewards programmes as one of their primary selling points, along with other benefits like free movie tickets, lounge access, waived annual fees, and so forth. You can exchange reward points you’ve accrued for a range of products and services, such as gift cards, airline miles, and other items.
However, be aware that the reward points you earn with your credit card usually expire after two or three years. Once these reward points have expired, you won’t be able to use them to obtain the benefits you would have if you had used them sooner. Thus, before registering for the american express platinum reserve credit card‘s reward point programme, they should carefully read the terms and conditions and make sure they redeem their points before they expire.
Last but not the least, note that credit cards are no devils, neither are they bane for your financial life. It all depends on how you use them and whether you repay the bills timely every month or not. When used smartly, its a no brainer that credit cards surely are a winner for your finances life, through their rewards points, discounts, cashbacks, no cost EMIs etc.