Thursday, August 11, 2022
LifestyleCredit card mistakes to avoid

Credit card mistakes to avoid

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Having a credit card is such a pleasure and its convenience is beyond measure but in the same way as a gun in an old cowboy flick could make someone trigger happy, we may also become swipe happy with a tendency to swipe or more commonly wave our way through purchases that we don’t really need often underestimating our spending ability.

Some of us may be disciplined spenders and not have this kind of impulsive or compulsive tendency to shop but there are still a number of credit card mistakes that we may inadvertently be making that we need to watch out for.

Here are some of them

Late payment/Missed payments

Missing a payment or paying your credit card bill late is a mistake you don’t want to make. Late payments incur interest and extra fees that you don’t need. In some cases it can also damage your credit rating.

Avoid this by setting a monthly reminder to pay your bill, at the very least pay the minimum amount.

Maxing out your card

Try and keep your credit usage below 30% of your total credit amount. As a rule try and use only 10% of your total credit limit and pay it off each month so you don’t have a balance.

Consumer financial advocate at CreditKarma, Colleen McCreary says that maxing out your credit cards could also cost you big money if you can’t pay off the total by the payment deadline. “The higher the outstanding balance (the amount of money you owe), the more interest you will pay, which can make it even more difficult to claim out of debt,” said McCreary.

Making only minimum payments every month

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While it is definitely better to make a minimum payment then to not make any payments at all, it is advisable to settle your payment in full. Not paying can rack up unnecessary charges in the long run and paying the minimum can result in you incurring long term debt that may take months or years to pay off.

Neglecting your billing statement

Check every transaction on your bill. Make sure it’s accurate so you can take action in case of fraudulent transactions.

Taking out a cash advance

This is a risky thing to do as interest starts accruing as soon as you do. Unlike regular purchases there is no grace period and you also incur a cash advance fee.

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Using a credit card for everyday purchases

Unless you follow a monthly budget and can easily pay your credit card balance in full each month, charging theses expenses on a credit card can be foolhardy. Common purchases like groceries and utility bills are best paid in a manner that helps you take control of your spending.

Chasing credit card rewards

These are usually misleading and are worth far less than the extra interest you will be charged if you can’t pay off the money you spend to earn those rewards. You may receive one point for each dollar you spend but may need 100,000 points to redeem a $100 discount on a flight ticket for instance. So all in all it may not be a worthwhile trade off. Also avoid going for multiple credit cards regardless of how many bonuses/rewards you may get. It’s harder to manage and you may miss payment deadlines when juggling multiple cards.

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