Credit cards are synonymous with debt and your unaccounted spending can lead to debts that may not be good for your financial health. Here are 5 risks associated with credit cards that you should be aware of:
Using credit cards on unsecured sites
To prevent identity thefts, use your credit cards only on secured sites. Secured sites are encrypted and prevent hackers from stealing your credit card details. To see whether the site is encrypted, check if there is a lock icon on the address bar. An encrypted site will always show ‘https’ instead of the normal ‘http’ in unsecured sites.
Giving credit cards to employees
Credit cards given to employees should have a credit limit, as there is no guarantee if the employee will spend money with the right intent. There have been instances when employees have swindled large amounts of money. MasterCard’s inControl credit card is a good option as it lets you set a credit limit. Once the credit limit is reached, no transaction can be made. The best way of course is to keep track of your account balance.
Giving credit card to your kid
A kid with a credit card can be dangerous. The credit card act prohibits anyone to issue credit cards to people who are under the age of 21. If you still decide to give a credit card to your daughter or son, make sure that you authorize by signing on the expense receipt or your child has your permission before spending. However, the best thing you can do is not to give your child a credit card.
Spending till the limit
Try to curb your expenses. Spending more than you can afford to pay off can impact your financial health negatively. If you spend till the maximum credit, your credit score goes down. Also, a sudden usage of your credit limit can lead to an increment of your interest rates. So, it’s better to think before spending too much with a credit card.
Improper card disposal can be risky
If you want to close your credit card account, confirm with your issuer that your outstanding balance is zero. Pay off your entire debts before closing your account. Interest may pile up if you do not clear your dues. Another important thing to do is to destroy the magnetic strip on your card by applying a strong magnet before disposing it.