Different people view credit cards differently. There are those who see them as a lifeline, and those who see them as a risk. The reality is they can be either one. However, if utilised correctly, a credit card can really help you monitor and control your spending, and make purchases and payments much more achievable when cash flow is not at its best. This is all assuming of course that your initial application to receive a card is approved, as there are a number of common mistakes that should be avoided.
Taking one based purely on an offer
If you’ve been getting a letter from your bank every other week telling you that you are entitled to apply for the latest kind of credit card, it does not mean you have to agree to it. These cards come with a lot of responsibility and while they are great for maintaining necessary spending while cash is low, if you can comfortably afford your financial commitments without a card, you should not feel pressured into accepting one just because you can.
Thinking of it as a last resort
Many people apply for a credit card once they are already in debt and struggling to meet existing payments. This is not the time to apply, as this will often encourage reckless spending and serve merely to accumulate further debts that you cannot afford to pay.
Applying for several cards
Debt in Malaysia is driven largely by credit cards and this is often because people apply for numerous cards from different banks, thinking it will help them spread costs and avoid falling into debt on one card. The problem is they lose track of their spending and build up an even bigger overall debt.
Applying for the wrong type
Credit cards are not standard issue; there are many different types available. From different interest rates to ones aimed at businesses, the range is often underestimated; meaning people sometimes apply for a card that is not the one best suited to their needs. Consider the manner in which you intend to use your card before weighing up all the options; then apply for the card that is right for you.
Not knowing the details
When it comes to borrowing money, any deal is likely to come with small print or possible extras, as lenders are always looking to get the most money they possibly can out of the transaction. The wide scale mis-selling of Payment Protection Insurance (PPI) in much of Europe and America acts as a stark reminder to the world about the importance of knowing exactly what you are agreeing to before you sign the dotted line. Even banks are a type of business after all and we need to ensure they don’t rip us off with unfair terms.
Not checking your credit rating
We all know a poor credit rating can be a real stumbling block when it comes to financial matters; no less so than when applying for a new plastic. This is why it is important to check your own rating before you apply as a bank or lender will carry out their own checks into your financial past before they agree to issue you with a card. If they find it to be in a poor state, they will likely decline your application causing your rating to be black marked yet again, making it even harder to apply in the future. If you suspect rejection is possible, try to clear debts and improve your situation before you apply.
This post was written by Gladstone Brookes, a UK based company that deals with PPI claims relating to mis-sold policies. With specially trained staff, they have managed to reclaim over £28.1 million this year alone at a success rate of 87%.
