7 Costly Credit Card Mistakes Almost Everyone Makes

Don’t you see RED in the credit card? Read this story… Rishi just graduated and joined a call centre recently.  He was very excited to get his first credit card as it meant a lot to him – freedom to party, shop and entertain.  He got easily carried away with offers and rewards and ended up with multiple credit cards from different banks.  He overspent on gadgets and parties without keeping a track on his credit cards. Very soon what started as an effortless transaction became a nightmare. It became exceedingly difficult for Rishi to pay off his monthly credit card bills.  This is a very common story and it can happen to anybody if you are not aware of these mistakes. 

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7 Costly Credit Card Mistakes

1. Not checking for hidden charges: All credit card companies woo gullible people with zero charge credit cards and overwhelm them with discounts and rewards. Holding multiple cards is considered a style statement as was the case with Rishi. But every youngster forgets to ask one basic question before adding another card “Are credit cards really free?”

Yes the credit cards happen to be free with some riders.  The credit card may be sometimes free for the first year, but there are annual renewal charges subsequently.  They may be lifetime free as long as a person is ready to spend enormous amount of money yearly.  Before waving -swiping a card in petrol pump, do we realize that many cards charge upto 2.5% of surcharge. The different kinds of charges that normally apply are annual renewal charges, late payment charges, surcharge, processing fee for EMI (Equated monthly installments), cash withdrawal charges and so on.

2. Ignoring Interest rates: Every credit company make money on credit. It means that every time credit card user does not pay a bill in time, he ends up paying high interest rates. The following three instances make it extremely clear. 

Rishi forgot to pay the bill for one month – the credit card company charged late payment charges and only 3% interest. Rishi was pretty happy with that – but what he forgot to notice is those monthly interest rates are concealing the annual rates, which come to +36%.

Rishi pays only the minimum amount, as late payment charges are not applicable.  He does not know that he has to pay significant annual interest rates of 36% not only on the outstanding amount, but also on any new credit transactions as the credit card company feels/assumes that Rishi is no longer in a position to pay.

Rishi used credit card to withdraw cash as he needs cash urgently.  He  pays 2% transaction charges for the withdrawal. There’s no credit period in case of cash withdrawal, so he will be charged with 36% rate from the day 1 of cash withdrawal.

The lessons to be learnt are – completely pay off the credit card bill in the stipulated period.  Always pay your credit card bills in time and avoid taking EMI’s or cash using credit card. If there is a tendency to forget bill payments, then link your bank accounts with credit cards so that the bill due is directly debited from your account

3. Overlooking safety: One of the biggest blunders, people do is disclose credit card number, CVV number (card verification value), PIN (cash)  or online PIN on the phone or email.  Do not give credit card details, especially to your good friends or credit card employees, as they have other details of you. Sign the strip at the back of card before using it for the first time. Losing unsigned card could pose a serious problem.

4. Paying no attention to Online Security: Our darling (No SEC 377 😉 ) Rishi likes to shop online as he feels he gets good offers from these websites. He uses an application for storing all his credit card details so that he can access it from anywhere.

Rishi unwittingly provided all the credit card information for future fraud. Do not duplicate your credit card information by giving it to unknown apps or unsecure sites. There should not be any duplication even on very popular shopping sites as passwords can be easily stolen.

5. Paying no heed to Credit limits: Set credit limit at moderate level neither too high nor too low.  Do not set the credit limits very high as there is a tendency to overspend and also a risk of high loss if credit card is lost.   At the same time do not set it so low that you exceed your credit limits sometimes.  Credit card companies charge high interest rates on transactions above credit level.  Indian banks are also taking note of credit score, which suffers every time you exceed your credit limits. A bad credit score means you may be charged high interest rates for all future loans or may find difficulty in getting a loan.

6. Losing track of Credit card transactions: Getting back to the example of Rishi – he treats a special friend in a five star hotel on her birthday.  He was expecting a 15% discount on one of his credit cards.  As he wanted to show off, he never bothered to find out with the hotel employee whether the discount is still valid.  He not only went overboard with expenses but lost 15% discount as the offer is no longer valid.

If Rishi was a little smarter he could have enquired with the hotel employee whether he can get discount on any of his other credit cards. To make an informed decision it is important that the user is not only cautious of his expenses but also aware of credit card rules and rates that apply. One easy way to keep track of payments and current rates is to read in detail each and every transaction on the credit card statements.

7. Loss of credit card – It is very difficult to detect a credit card loss.  Since the advent of chip cards, the credit card chip insert takes a longer time than the swipe which was used before. So there is a tendency to forget the credit cards.  Link credit card transaction updates with your email or sms.  It not only helps users to manage expenses and also protects them from credit card fraud or loss.

Credit card when used right is an amazing tool that simplifies one’s life, but the wrong or untamed use of it can prove to be a disaster to your financial life. It has almost become a necessity, unless one wants to carry huge amounts of cash. So understanding its importance, Let us not blame credit cards for our careless mistakes and poor spending habits and be a bit cautious while carrying and using these.

We would like to hear and learn from your credit card blunders.  Do share with us any interesting incidentor experience you had with a credit card?  Please express your views in our comments section.


  1. As usual a very educating article. People will definitely benefit from this as you share some of the hidden facts related to the credit cards.

    Appreciate your simple way of explaining the things.


  2. One point, I would like to add:
    When in doubt use OTP while transaction, so even if the CC no is stolen your iPin will be safe.

  3. Very nice article Hemant. As you mentioned, CC can be useful as well as dangerous. If you are financially educated and disciplined, CC is your friend. I’ve used CC for years and have actually made money on it. I buy everything on CC while my money earns interest in an offset account. At the end of month, the CC bill is paid in full from my offset account. There are no annual fees as my monthly groceries and other necessary expenses are way above the threshold where no CC fees are charged.
    To summarise, using CC has actually made me some money over the years which I wouldn’t have made using my own cash. But again, you need to be financially disciplined to actually make money using CC.

  4. good article Mr.Hemant,
    I just want to add one more point. In case of partial payment, the interest is charged from day one for subsequent purchases. you loss 45 days free credit.

  5. Hi,

    Very nicely written and I agree to all the points mentioned. Recently I had applied for a new credit card (apart from the one I already have) I was told by the bank that my credit limit would be higher than my exisiting card which I gave it to them while applying for this card. After reading your article I really think twice before even applying any more new card and online transaction has been become a way of life for me. I will stay doubly careful before doing it. Thanks a lot once again.

  6. CC companies in India can make you fool very easily.. I knew about the various charges and yet went with a standard charted credit card as they empathized that its life time free card and have made through enquiries. Shocked to check last month bill for an annual charge that was applicable from second year. I dont have any documents to prove my case so the max I can do is get rid of it. Wanted to add below points based on my experience.

    1) Check your bill regularly, enquire about each fee incase you find it fishy.
    2) Never ever make late payments, better dont spend if you can’t make the bill next month.
    3) As it becomes increasingly difficult to maintain paper documents (shifting homes, work etc..) its better to have a scanned copy of all the documents in your mail accounts.(after 2 years also, you can screw them 🙂
    4) At any point in time, dont have more then 2 credit cards. Even ifthere are no charges, deactivate the old one if you no longer need it.
    5) Last but not least, don’t beleive the CC sales(wo)men. They have tight targets and mayn’t tell you all the facts. Do your research..

  7. I spent Rs. 2320/- for petrol at a petrol pump by using my CC. 2.5 % as additional amount has been deducted from my account. shall i get it back? please let me know.

  8. again, very clear and to the point.feedbacks had complemented it.

    i had applied for a CC but was rejected due to low score. i was newly employed then. how could my credit score be low when i had just begun. later they told me that my application score is low, meaning- i had not stayed in my current residence for a certain number of days. now, i was asked to apply again but i am worried that my CIBIL score may come down. Someone told me that the score would go down if it was sought for the same purpose thrice. is that true. can i apply now. kindly help me know the credit card sanctioning process and how it could affect my CIBIL.

    would like to know more about credit rating (CIBIL) and how credit card could push it up or pull it down.

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