5 mistakes that can cost you heavy price when using your credit or debit cards

5 Mistakes that can cost you heavy price when using credit or debit cards

The bank gave you the plastic card and you are happy with it. The credit cards are loaded with credits or cash and you  shop, buy things, book a flight, get privilege in VIP lounges at the international airports, dine at luxurious hotels and do what you want. On the other hand debit cards are loaded with your own savings that you have accumulated with the bank who issued you the debit card. So you are happy to have both of these cards specially the credit cards because it offers you money and the bank might have advised you that only a small amount which is nothing for you will be charged as fee.

But here are the five mistakes that can cost you heavy price when using your credit or debit cards

1. Using Debit Cards at App stores

iTunes store

As you own a smartphone you want the latest apps too be it utility apps, games apps or any other apps. Most of them are free to use but few cost you with a subscription service One such incident happened that a guy paid $9.99 as a subscription service to iTunes and he used a debit card to do the online transaction. But next day the bank informed him that there were two transactions charged to his account: the one he approved for around $10, and a second one for almost $60! He had been hacked, through no fault of his own.

Yes the card was hacked and the hackers stole away money from your credit. Though in such cases the bank blocks the transaction, and shuts the original debit card and gives you new card but money loss is never returned.

When you’re making a subscription purchase through an online account like iTunes, consider purchasing a prepaid debit card instead of using one that is connected to your bank account. Another option is to purchase a gift card for the service you want to purchase and pay for your subscription, or item, with the gift card instead of connecting your debit card. This way, thieves can only access a limited amount of your cash.

2. Never write the PIN of your Cards or disclose them to anyone

PIN of credit card

Never ever write your Credit or Debit card PIN or disclose them even to your most trusted person as doing this means a loophole that could relieve them of responsibility of covering your losses if your account is compromised.

If you cannot remember your PIN create the one that you can remember or learn it by heart. One of my friends jotted her PIN of debit card and  put it safe in her drawer. A few months later, she realized her entire savings account had been drained. She told the bank quite innocently that she had her security number written down, not realizing that her admission alleviated the bank from replacing her stolen funds. She was out several hundred dollars. Even sending a family member with your PIN number and card to get something from grocery might be risky as it is technically against the rules of the bank.

Also many people write their PIN on their Notes apps on  cell phones that too is very risky. Keeping your account protected is worth the extra hassles, though and if you find someone compromising with your PIN request a new PIN from your bank even if you are having trouble remembering it. Also change your PIN with online netbanking and save your PIN but do not disclose to anyone.

3. Do not withdraw cash from credit card

Withdrawing cash

I remember my mistake of taking out cash from credit card when my salary didn’t turned up on time and I had to pay my  house rent. Withdrawing cash using a credit card, even though very convenient in an emergency, can turn out to be a very costly affair. Know that every credit card has a billing date on which the bill having a list of purchases is generated. This bill has a certain due date by which the credit card holder has to pay back the bank –  either the total outstanding or the minimum due. When you withdraw cash using a credit card there is no free credit period. In case of cash, the interest starts accumulating from day one. Besides a cash withdrawal charge is also levied. Interest on cash withdrawn typically varies from per month and this interest is compounded monthly, and you end up paying more usually 3-5% more the cash you withdrew from credit card.

4. Never get close to your credit limit when using credit cards

Credit card limit

This mistake is often done by many of us to use your credit card  when you are nearing or have exceeded your credit limit. It’s important that you check your statements every month to see where you stand. Checking your statements can keep you from exceeding your credit limit. Even though the CARD Act ended the policy of automatically enrolling customers in over-limit programs that charged steep fees, it still can be embarrassing to have your card rejected at the cash register when out shopping.

5. You break your household budget using cards

Use of credit card

Remember the old days when there were no cards and people use to pay real cash for everything. They physically knew the cash they handled and were of concern when exceeding their spending limits. Making purchases with credit or debit could also mean that you’ve broken your budget. We all need a budget to run our financials be it at home or at business and one should stick to that budget every month. This is the best way to make sure that your bills are paid and that you are building your savings account. If you are making purchases, even small ones, on your credit card, then you are exceeding that budget. Each time you use your credit card, you are borrowing money and that money needs to be paid back with interest. If you need to borrow money to make a purchase, then either you don’t need the item in the first place or you need to re-calculate your budget and come up with the cash for it.

Avoid these five mistakes that can cost you the price of using your credit or debit cards. Best way is to use cash often and use cards only in case of emergencies that too with proper security.

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