Understanding how credit cards work is important for making informed decisions. However, once you apply for a credit card and receive it, you should avoid several common mistakes to maximize the benefits of your new card. While fundamental practices like paying dues on time and avoiding cash withdrawals apply across all cards, there are specific mistakes related to new cards that can hamper their overall value. Here are five common mistakes you should avoid after getting a new credit card:
Leaving the card inactive
One common misconception is that leaving a new credit card inactive will help build or repair your credit score. However, according to RBI guidelines, a card issuer cannot create a new credit card account until the user has activated the card. If your card remains inactive for 37 days after issuance, the issuer will close the account. Therefore, it is important to activate your card within 37 days (30 days and a grace period of 7 days). Keeping your card inactive does not improve your credit score, so it is important to activate your new credit card timely.
Missing the sign-up bonus
Many credit cards offer a sign-up or welcome bonus in the form of rewards points, free memberships, or discounts. However, these bonuses often come with conditions, such as you need to achieve a spending milestone within the first 30 or 90 days to avail this benefit. While it’s important not to overspend just to qualify, you can plan your spending strategically. For example, covering a large group expense and getting reimbursed by others can help you meet the requirement. Remember, returned purchases or transactions converted into EMIs may not count toward the spending threshold, so read the terms carefully.
Ignoring additional perks
While rewards points and cashback are key features of most credit cards, many cards come with additional benefits that enhance their overall value. Overlooking these benefits could mean losing out on valuable rewards. For instance, a travel card might offer complimentary membership for a lounge access program or discounts at specific hotels. However, you may need to enroll in these programs to avail the benefits. It’s important to familiarize yourself with your card’s features and benefits to make the most out of it.
Mismanaging reward redemption
Most credit cards offer reward points for your purchases, but the value of these points can vary depending on how you redeem them. For example, redeeming points for cash credit might give you a lower value of Rs. 0.25 compared to transferring them to an airline or hotel loyalty program at a value of 1 RP = Rs. 1. Understanding the redemption options and selecting the most valuable one is important to maximize your benefits. This is particularly important if you’ve upgraded your card and are transferring points from the old card.
Missing discount or accelerated reward offers
Some credit cards offer direct discounts or accelerated reward points on specific merchants or platforms. If you don’t use your card strategically on these platforms, you could miss out on potential savings. Additionally, some cards offer accelerated rewards on select categories. Knowing these offers and using different cards for different types of spending can help you maximize your benefits. For example, when shopping online, it’s better to use a credit card that offers accelerated benefits specifically for online purchases rather than one that offers similar rewards across all categories.
Also Read: 5 bank cards offer a range of complimentary services
So, these are some of the mistakes you should avoid to maximize the benefits of your credit card. Additionally, make sure to set up or activate your credit card digitally to easily track your spending and bill payments. By using your card responsibly and managing your expenses smartly, you can get the most value out of your new credit card.
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