5 Credit Card Mistakes to Avoid During the COVID-19 Lockdown

During the COVID-19 lockdown, when liquidity is a major concern, credit cards can bail you out of sticky situations. However, given the gravity of the situation, there are high chances of committing these five credit card mistakes which could land you in a soup. Read on to know the credit card slip-ups to avoid during this lockdown.

Given the current circumstances, the Reserve Bank of India (RBI) has offered a moratorium period on term loan and credit card dues. This period initially till May 31, 2020, has been extended to August 31, 2020. However, if you aren’t facing a severe liquidity crunch, you should avoid availing the moratorium period.This is because while you may not need to pay the dues immediately, they will ultimately keep on adding to the outstanding amount and will result in huge upfront interest payment. Credit card interest rates on the higher side and hence it’s advisable to pay off the dues if you can do so.

Note that swiping your credit card to withdraw cash from ATM is radically different from a debit card. When you withdraw money using your credit card, not only you need to pay interest on the money withdrawn but also don’t get the interest-free window for repayment that is provided otherwise when you swipe at a merchant point of sale (POS).Hence, if you require cash, avoid swiping your credit card unless it’s absolutely necessary. Use your debit card instead.

This is one of the common credit card mistakes committed. A credit utilisation ratio is the amount of credit utilised by you against your credit card limit. A high ratio indicates that you like to live on borrowed money and this can significantly affect your credit score.With a high ratio, it can become difficult for you to avail loans in the future. Therefore, try to keep your credit utilisation ratio as low as possible.

Credit cards offer reward points on their usage that you can adjust against outstanding bills or get discounts on future purchases. However, note that reward points have their expiry period.
In these pressing times, it’s vital to keep track of these points and ensure not to let them expire. If possible, adjust them to your outstanding credit card bill.

Each credit card comes with a credit limit until which you can borrow. However, utilising this limit to the full can not only bring down your credit score but also make it challenging to repay the outstanding dues.Hence, make sure to avoid utilising the credit card limit to the fullest and stick to a budget. This will not only keep your expenses under control but also help you to tide monetary crisis. In conclusion Avoiding these credit card mistakes can hold in you in good stead to tide the current crisis and be on a solid footing in the subsequent months.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.