Do you know, total credit card balances in the U.S are $893 billion as of the first quarter of 2020? After seeing these figures, these numbers seem huge.

But, what about using it in a manner that would not harm your finances? A credit card can be your best mate if you choose it correctly. Buying a card without looking for information is like inviting a person at home to whom you don't know.

An appropriate selection of the card based on lucrative offers can damage your budget planning and credit score. Those people, who use it as an emergency card, are utilizing it most. Knowing the fee, APR, charges, and what type of card you are buying is important. Most people aren't aware of what are the steps to choose the correct credit card for them.

In this blog post, we've compiled some mistakes that could be dangerous while choosing a credit card. Keep reading them. We'll also tell you that you can ask your credit card provider before finalizing the right one for you.

Here're a few of the worst mistakes to avoid whilst choosing the right credit card

Mistake #1: Not having proper knowledge of applicable fees & APR

The abbreviation of APR is "annual percentage rate. It refers to the annual rate of interest charged to borrowers and paid to lenders. This includes annual fees or charges on transactions. "APR" depends on various factors such as the rates offered in the market, the initial interest rate set by the main bank, and the credit score of the borrower. Sometimes when the main bank reduces the initial rate of interest, competitive credit card companies offer the APR at 0%. For instance, it might be attractive and lucrative but the customer has to investigate the complete detail to avoid any hidden charges. Therefore, before buying the card check a few things with the credit card company.

●What is the annual fee?

●What is APR on transactions?

●What is penalty APR?

●What is the penalty for late payment?

Thus, by asking the following questions to your lenders you can choose the right card for you.

Mistake #2: Wrong card selection

In most cases, buyers don't know which card is suitable for him/her. Inappropriate card selection can damage your credit score. Hence, determine your requirement and choose the right one. In the market a lot of credit card companies are there, they offer you rewards, cash back, and other attractive offers on your travel spending, while you are a frequent shopper and you do not travel much, in that case, you have to ask for a shopper card.

Credit card companies offer you different types of cards. Few cards help you to improve your credit score when it's limited. Some of the card companies offer you to save interest on your savings and reward you with points or provide a discount offer on the next purchase.

However, credit cards never explain to you in detail you have to ask them to provide the right card basis on your need.

Mistake #3: Withdrawing the cash in advance

A credit card is a card for emergencies, when you need cash you can withdraw from the ATM. A neophyte can be a victim when he doesn't know the charges on cash withdrawal. The interest rate will be charged from the date of the transaction until the person makes the repayment in full. Usually, an interest rate of 2.5 % cent to 3.5 % per month is charged by the company in cash withdrawal. However, it can vary from bank to bank. In cash withdrawal, banks do not offer rewards and free time which is availed on shopping transactions. Therefore, some people make mistakes to withdraw cash when it is not urgent. Hence, before buying the card ask for the interest rate on cash withdrawal.

Mistake #4: Applying for a new card very often

Applying a new card will reflect in your credit report which shows the risk to your lenders. Try to keep a single card or card which suits you. Managing multiple cards can be difficult when you forgot to pay the bills and it leads to penalty charges. Your credit score plays a major role in buying a credit card. So check your credit score first that helps you prevent damaging the record. Some experts suggest not applying for a new credit card before six months.

Mistake #5: Closing your credit card all of sudden

The average length of time is one of the key factors for making up credit scores. So, why should you care about canceling the credit card? Here's why: if you all of sudden close the credit card, it could affect the credit card history. It is advisable not to close your credit cards, especially if you have old ones. It only makes sense of closing the credit card when you are charged a hefty annual fee.

Mistake #6: Exceeding the card limit

Getting close to or exceeding the credit card limit puts you at risk for over-the-limit fees. It can be sometimes dangerous for you as a cardholder. All you need to maintain a good credit card balance for health credit scores and manageable payment amounts.

Mistake #7: Not aware of the credit card terms

Are you well aware of your company's credit card terms and regulations? If not, go through with this first. This is because late payments could make you more likely to pay more on time. It could just drain your finances. This is something not good before applying for new cards. All you need to know is how you should and should not use credit cards based on how your creditor responds to you. Also, review your credit card rules and terms once a year.

Top Questions to ask Credit Card Providers before applying for a credit card

Q #1: Can I choose my payment due date?

Yes. It depends on the previous transaction period you can call and your bank to change the date.

Q #2: Can you lower my interest rate?

No. During card buying the set interest rate will be final. In case the central bank reduces the interest rate then you can ask your bank.

Q #3: Will you raise my credit card limit?

Yes. Based on usage and repayment of dues within the time, some bank's systems automatically increase the credit card limit. If it is not there then you can request your bank to raise your credit limit.

Q #4: What Rewards Does This Credit Card Offer?

Credit card generally offers you a reward as a cashback or points. When you finish some targeted spendings you will have some sort of amount of money in your account. In some cases, credit cards reward you with points that you can redeem online or offline at selected stores.

Wrapping Up

The more you research before applying for a credit card, the easier it will be to get rid of the obstacles. Knowing the above-mentioned mistakes before or after applying for the credit card can help you to avoid them at all costs. Develop good credit card habits and use them responsibly to get maximum benefits without worrying about it.