5 Common Credit Card Mistakes for Hong Kong Card Holders
If you want to be responsible about your credit and finances, it is important for you to avoid common credit card mistakes that cardholders usually commit.
According to the May 2016 survey conducted by the Hong Kong Monetary Authority, there was an increase in the combined delinquent and rescheduled ratio in the credit card lending industry.
Although the increase seem small at 0.35%, it is still a bad omen for card holders. This shows a lack of responsible use and ownership when it comes to credit cards. If you add to that the charge-off amount increase of HK$ 14 million in the same quarter, you would think that a lot of credit card owners have a lot of learning to do when it comes to credit management.
The thing is, committing credit card mistakes can bring about a huge impact on your finances. Failing to pay your cards on time can rack up a lot of penalties and charges. If that is combined with the effect of the high-interest rates on your cards, your balance can quickly bloat and become unmanageable.
When you continue missing out of n payments, you can compromise your credit history and in effect, your credit score. That can hinder you from making financial investments – at least, if they involve loans like mortgages, etc.
This is the reason why credit card holders should educate themselves when it comes to using this payment tool for purchases.
What are the common credit card mistakes?
These are the typical credit card mistakes that some Hong Kong card holders commit:
Thinking it is an extension of your money.
The first mistake that new cardholders usually commit is thinking that their cards are an extension of their wallet. This is a common misconception and a dangerous one. This is the very mindset that pushes consumers towards overspending and huge amounts of credit card debt.
Although your name is on that card, you are not using your own money. You are actually using the money of the credit card issuer. When you pay back that money, you can bet that it will come with a cost. Considering the high-interest on these cards, you end up paying a lot more than the value of the purchase.
Ignoring the fine print.
This is also a typical mistake committed by credit card holders in Hong Kong. According to a publication on JDPower.com about the use of credit cards in Hong Kong, it is revealed that 9 out of 10 do not understand the fine print. It can also be assumed that they do not try to understand the terms and conditions surrounding their credit cards. Although the study mentioned that the respondents are financially disciplined, this is an indication that they are unable to maximize the benefits of using their cards.
You have to understand the terms on the card you are using because that will help you avoid unnecessary fees associated with credit card mistakes that you commonly commit.
Failing to utilize the rewards program of the card.
The same study also revealed that ⅔ of cardholders in Hong Kong fail to understand the process of earning rewards. Again, this stems from their inability to understand the fine print of their card.
If you got the card because of the rewards program, make sure you use it extensively. That is how you can increase that value of all your purchases. You may be letting go of freebies discounts, and even travel rewards – just because you did not take the time to understand your card thoroughly. If there is anything that you do not understand, ask the credit card issuer. They will explain it to you.
Not budgeting your card expenses.
Another mistake that is actually common across global credit card users is this – not budgeting their credit card expenses. This is as simple as knowing how much you should spend on the card each month so you can pay it in full when the billing statement comes. According to the same study by J.D. Power, the average card holder spends $5,469 each month – this is on their primary card alone. If you fall into this category, make sure your monthly budget includes an entry of $5,500 for your credit card payment.
Having too many credit cards.
Finally, the last of the credit card mistakes committed in Hong Kong is having too many credit cards.
The same study revealed that cardholders usually have 4 credit cards – but they do not use all of them. In fact, they usually use just 3 in the past year. Make sure that you only apply for the cards that you will really use. Some of these cards charge annual fees that may be costing you unnecessary money. Avoid wasting money on fees and focus only on the cards that you will really use.
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How to minimize the risk of using credit cards
The Hong Kong Monetary Authority issued a warning regarding the use of contactless payment credit cards. According to the article published in Hong Kong Free Press, the data of card holders are in danger of being obtained by malicious minded individuals.
The article revealed that it is easy to extract the information of the card holder – and this data can be used to steal from unsuspecting credit card owners. The criminals holding the information can make on-line purchases using the stolen identity. If this is true, you have to make sure that your data will not be in danger.
Here are some tips that you need to follow to keep yourself protected:
- Shop only in reputable establishments.
- Make sure your card never leaves your sight – or hand.
- Be wary of calls from bank employees who are asking for your information. Do not answer their queries and call the official number of the bank to verify if such calls are authorized. If you have to change anything about your information, it is best to visit the bank personally.
- Scrutinize the details on your billing statement. If there are unauthorized purchases, report this to your credit card issuer immediately.
- Know what to do in case your security is compromised. The HKMA is mandating banks to have breached regulations so they can conduct investigations in case of reports from card holders.