Applying for a credit card is quick and easy, but making mistakes during the application process or early usage can damage your credit score for years. Let's outline the top 10 mistakes to avoid before applying online.
1. Applying for Multiple Cards at the Same Time
Every time you apply for a credit card, the bank makes a **hard inquiry** on your credit report. If you apply for multiple cards simultaneously, it signals to lenders that you are credit-hungry. This can result in all applications being rejected and a lower CIBIL score.
2. Not Checking Your CIBIL Score First
Before applying, check your CIBIL score. If your score is below 750, your application for premium cards will likely be rejected. Knowing your score allows you to apply for secured or student cards instead, avoiding rejection.
3. Paying Only the Minimum Amount Due
The "Minimum Amount Due" is typically just 5% of your total balance. While paying it avoids late payment fees, the bank still charges interest rates of 36% to 45% per annum on the remaining balance. Always pay the **Total Amount Due** in full.
4. Withdrawing Cash from ATMs
Using a credit card to withdraw cash triggers a **cash advance fee** (usually 2.5% or Rs. 500) and interest starts accruing immediately, with no interest-free grace period. Never withdraw cash using a credit card.
5. Ignoring the Foreign Exchange (Forex) Markup Fee
Standard credit cards charge a 3.5% fee on transactions in foreign currencies. If you travel internationally or buy from overseas websites, get a card with a low forex markup (1% to 1.99%) or a zero forex markup card.
6. Not Reviewing Billing Statements for Errors
Check your statements monthly for unauthorized charges, billing errors, or subscription renewals you forgot about. You have a limited window (typically 30 days) to dispute unauthorized transactions.
7. Closing Old Credit Accounts
Closing your oldest credit card reduces your average credit history length, which can lower your CIBIL score. Keep old, no-fee cards open and active to maintain a long credit history.
8. Maxing Out Your Credit Limit
Using more than 30% of your credit limit regularly signals that you are overextended. Maintain a low utilization ratio to keep your CIBIL score high.
9. Not Using the Card's Perks
Many cards offer welcome vouchers, airport lounge access, and milestone benefits that offset the annual fee. Review these perks and use them to get the most value out of your card.
10. Falling for "No-Cost EMI" Traps
No-Cost EMIs can be a useful tool, but they still charge processing fees and GST on the interest component. Review these extra costs before choosing EMI options.
Conclusion
Avoiding these mistakes will help you maintain a high credit score, get approved for the cards you want, and enjoy the benefits of credit rewards risk-free.