Credit Cards: 5 Pitfalls to Avoid to Maximize Your Benefits

Credit cards are very helpful in managing your financial needs. For people with a stable but fixed income, especially salaried people, credit cards are a very useful tool as they allow you to meet expenses without spending your income right away. The 18-55 day credit-free period offered by most issuers, which includes multiple reward points, cash back, and free airline miles, is certainly enough of an incentive to get a credit card.

Banks issue Credit cards For salaried individuals, self-employed professionals and business owners, credit cards are undoubtedly a convenient tool. But here are some mistakes you should avoid when applying for a credit card.

Not checking credit score

He Credit Score It is the most important metric available to banks and financial institutions to assess a person’s ability to pay. They check their credit score, which is available from credit agencies such as TransUnion CIBILbefore approving a loan or any credit product. A credit score above 750 is generally considered good for obtaining a credit card. A credit score is a three-digit number (between 300 and 900) that is used to assess a person’s financial health.

Do not check the Credit Score It is one of the major mistakes to avoid while applying for a credit card. If your credit score is quite low, banks will not issue you a credit card. But do not get upset over a bad score as you can always improve it. In such cases, it is better to wait before applying for a credit card as it will give you the required time to improve your score. Checking the credit score is a must as it will also help you find errors and inconsistencies in the credit report and correct them.

Ignoring eligibility criteria

There are many credit cards available today and each of them is custom designed to meet specific requirements. If your income level does not match the credit card you are applying for, your application may be rejected. Therefore, make sure you apply for the credit card that matches your financial profile.

If your income level is not very high, you should not apply for a high-end or premium credit card. On the contrary, people with high incomes will be able to easily obtain one. luxury credit card which comes with a host of benefits.

Applications with basic errors

It may seem like a fairly trivial thing, but it is an important thing to keep in mind when applying for a credit card. Providing incorrect and inconsistent information on the application is a major mistake to avoid. For example, if your annual income in your ITR (Income Tax Return) is ₹3.6 lakh per year, but if you overdo it in your application just to increase your chances of getting the card, you will end up not getting it at all.

Lenders verify the information you provide and major discrepancies will lead to rejection of the application. Always be honest and provide accurate details to banks. Your credit card application must have all the basic information such as income proof (salary certificate or ITR), identity proof (Aadhaar card) and address proof (PAN card, voter ID or driving license).

Don’t read the fine print

Credit cards come with all sorts of conditions, such as interest-free period, late payment fee, and monthly interest on outstanding balances. Read the fine print before signing a credit card application as it will help you make an informed decision. Almost all banks offer free credit cards for life for people with a good credit rating, especially salaried people. But these privileges are not available to everyone.

Your credit card may charge you a high enrollment fee and high annual charges. If you read the eligibility By analyzing the terms and conditions properly, you can avoid the shock of having to pay fees you don’t know about. If you know what the credit card has to offer, you’ll be able to evaluate whether the benefits outweigh the fees and other costs.

Make frequent and multiple applications

If you apply for credit cards frequently, you will be considered a person who is desperate for credit and that could make your credit profile “high risk.” While people with high incomes own several credit cards, people with average income levels should only own one card and should not apply to several issuers in a short period of time in the hopes of getting at least one.

If a credit card application is rejected for a valid reason, such as a bad credit rating, it is best to wait six months to a year before trying again. Not only does this give you the opportunity to improve your credit rating, but it also significantly increases your chances of getting the card.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.