Credit cards are powerful financial tools when used correctly, but they can become a nightmare if handled poorly. In India, millions of users fall into the same traps every year—overspending, paying only minimum balance, taking unnecessary EMI, or applying for multiple cards at once.
If you want to avoid debt, maintain a strong credit score, and get maximum card benefits, learn these 7 common mistakes Indian users make and exactly how you can avoid them.
1. Paying Only the Minimum Due Amount
This is the biggest mistake new users make. Banks highlight the “Minimum Amount Due” to make it look easy, but it’s actually a debt trap.
Why it’s dangerous:
- You start paying 36–42% yearly interest
- Your outstanding keeps growing
- It takes years to clear the balance
How to avoid:
Always pay the full outstanding amount, not the minimum. If cash is short, convert large purchases into low-cost EMI rather than carrying forward the balance.
2. Using More Than 30% of Credit Limit
Credit utilization ratio is one of the most important factors in your CIBIL score.
What most users do:
They use 70–90% of their limit regularly.
Why it’s harmful:
- CIBIL score drops
- Banks start seeing you as “credit hungry”
- Future loan rejection chances increase
What you should do:
Keep utilization below 30%.
If your limit is ₹1,00,000, try not to use more than ₹30,000.
If needed, request for a limit increase after 6 months.
3. Applying for Too Many Cards at Once
When you apply for multiple cards in a short time, your CIBIL report shows several “hard inquiries”.
Why it’s bad:
- Banks think you’re desperate for credit
- Approval chances drop
- CIBIL score temporarily decreases
Pro Tip:
Apply for only 1–2 credit cards per year.
Choose wisely based on your spending pattern instead of applying everywhere.
4. Ignoring Hidden Charges and Terms
Many Indian users don’t read the charges associated with their card.
Some common charges people ignore:
- Cash withdrawal fee
- Late payment penalty
- Card replacement fee
- Over-limit charges
- Forex markup (mostly 3.5%)
- EMI foreclosure charges
These can cost thousands of rupees if ignored.
How to avoid:
Before using a card, download the bank’s “Schedule of Charges” PDF and go through the important points.
5. Withdrawing Cash From ATM Using Credit Card
Most users don’t know that withdrawing cash using a credit card is extremely expensive.
Why it’s a bad idea:
- Interest starts immediately (no interest-free period)
- Cash withdrawal fee (2.5%–3%)
- Additional GST
- Can damage your credit score
Use this option only during serious emergencies, not for daily expenses.
6. Closing Old Credit Cards Without Thinking
Your oldest credit card increases the average credit age, which boosts your credit score.
What users do:
They close an old card thinking:
- “I don’t use it anymore”
- “I want to reduce cards”
Why it hurts your CIBIL:
- Credit age reduces
- Available credit limit drops
- Utilization ratio increases
- CIBIL score falls
Best approach:
Don’t close your oldest card.
If it has an annual fee, ask the bank to convert it into a Lifetime Free card.
7. Not Checking Credit Card Statements Every Month
A surprising number of users never check their monthly statements.
Why it’s risky:
- Fraud transactions go unnoticed
- Extra charges may appear
- Duplicate payments may happen
- Wrong EMI conversions
What you should do:
Check your statement every month for:
- Wrong charges
- Auto-debit subscriptions
- Incorrect interest
- Unrecognized transactions
Raise a dispute immediately if you find anything suspicious.
Conclusion: Smart Credit Card Use = Financial Freedom
Avoiding these 7 mistakes can save you thousands of rupees every year and make you a responsible card user. Credit cards can actually improve your financial health if used wisely.
Remember the golden rules:
- Pay full bill on time
- Keep utilization under 30%
- Never withdraw cash
- Avoid multiple hard inquiries
- Monitor your statements
- Understand charges properly
By following these points, you’ll enjoy rewards, cashback, travel benefits, and a strong credit score—without any debt or stress.
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