You might consider the credit card as your best companion in crucial times but this small plastic card can cost you a lot if you don’t think twice while using it.
There are hundreds and thousands of people out there who have landed into huge debts following some small credit card mistakes. And we don’t want you to experience the misery of being in debt, so, here we have pieced together all the credit card mistakes you need to avoid in order to live a debt-free life.
10 Small Credit Card Mistakes That Can Cost You Extra Money
Number One: Delayed Bills
Missing or delaying bills has remained a common practice of most credit card users despite the fact that it poses a negative effect on your credit card score. As revealed by FICO, your credit card score can drop to a maximum of 83 points if you have missed a payment for more than 30 days and the credit score points may fall up to 133 points upon delaying payment for more than 90 days.
The best solution to tackle the issue of dropping your credit card score is paying your bills before they touch the due date.
Upon incurring a new expense, you might decide on retaining your due bills until the next month without thinking of the interest rate. Although you might have to encounter fewer expenses this month, you will be bound to pay extra charges on your bills after the due date.
The interest charges may seem less at the beginning but they will slowly start disturbing your budgeting thus the debt cycle will keep revolving.
Number Two: Charging The Card Beyond Credit Limit
Among the most dangerous credit card mistakes is using the card beyond its limit. Maxing out a credit card can be really dangerous for your credit score and you may also incur penalty and interest charges.
Thus, it would be difficult for you to manage a healthy credit score and your credit card debt may start swelling.
In order to retain a healthy credit card balance, make sure that you are not using your credit card beyond 30% of your credit limit.
A simple suggestion to avoid this credit card mistake is to stop using the card as you start getting closer to your credit limit.
Number Three: Using Too Many Credit Cards At Once
People who are fond of credit cards use more than one credit card at a time without realizing that they are making the biggest Credit Card Mistakes. Here are some drawbacks of using too many credit cards at once:
- You will be required to cope with multiple due dates.
- Keeping track of multiple billing cycles will be difficult.
- You might have to cope with multiple loans at once.
- Extra penalties and interest fees.
- Having multiple credit cards also can hurt your credit score.
Number Four: Using Cards Without Being Aware Of The Credit Card Terms
Another credit card mistake that most credit card users do is, they start using this short-term loan without understanding its terms and conditions.
The credit card terms outline all the conditions about penalty fees, interest charges, and other billing criteria. What most credit card users do is, they don’t understand the terms before they start using the cards thus incurring extra charges.
Based on the terms you will understand how you should and should not use your card. This will help cut off extra charges and it will give you more control over your card.
Financial experts also suggest credit card users, review the terms and conditions of their credit cards at least twice a year. This will help them get informed about any changes being made to the conditions.
Number Five: Not Going Through The Billing Statement
Among the least addressed credit card mistakes is missing out on the billing statement. It is a ritual for most credit card users to ignore the billings statements; the majority of them simply do not open the statement.
However, this practice can cost you a lot as you may miss out on important announcements. The billing statements also keep sending alerts about fraudulent activities on your cards so, ignoring the billing statement can be the silliest credit card mistake that you will ever make.
Number Six: Giving Your Cards Out For Loan
Another common credit card mistake that people do is they give out their credit cards to other people as a loan. By doing so, you lose control over your card and cannot help what purchases the other person makes using it.
So, before loaning your card make sure you are prepared to pay for everything they have purchased using your card.
Number Seven: Not Reporting Your Lost Card Timely
If you haven’t still reported for your lost credit card, you are doing another mighty mistake. The longer you are taking to report the missing cards, the greater it will benefit the thieves.
Remember that, if you are not reporting the card, you will be held responsible for all the liabilities. However, as you report the stolen/missing card, you will no longer have any liability for the charges incurred after the complaint.
Number Eight: Making Minimal Payments To Pay Off Your Credit Card Balance
Most credit card users rely on making only minimal payments without thinking about their long-term effects. As you decide on minimal payments to pay off your credit card balance, it will take longer to pay off the debt thus you will have to pay interest for a longer time. This way, you will have to pay more than what you have spent.
Instead of accumulating the debt, try to pay off all your debts as soon as possible so that you will be able to pay all the due credit at a lower cost.
Number Nine: Taking Out Advance Cash
Most credit card companies encourage credit cardholders to use advance checks without informing the users about how they will be liable to pay the interest immediately. Advance checks are cash advances that start to accrue interest right after they are been taken.
Another drawback of taking out advance cash is, the users are not given a grace period. They are rather being charged an automatic fee that sometimes exceeds 4% on the amount of the advance being taken.
Thus to restrict yourself from making this credit card mistake, don’t fall for the enticing offers attached to the advance checks and shed them off as soon as you receive them.
Number Ten: Stop Ignoring Your Debt
To rectify your credit card mistakes, you have to face them, ignoring them is not a solution. After amassing a mountain of debt, what some credit card users do is, simply stop using the cards and opening their bills and start behaving as nothing has happened.
Well, this is the most dangerous credit mistake you can ever make. Ignoring the debt can only add to your troubles. Try to pay off your debt and don’t use your card until your cover up the negative balance.
If you don’t have enough resources to pay off your debt, contact your credit card company to renegotiate the credit terms.
Related: Your Perfect Credit Score – Determined By 3 Best Credit Bureaus
The Takeaway
Using a credit card can bring several boons to users but some common credit mistakes can make you land into heavy debts. Thus, it is important for the users to use these convenient financial tools sensibly and responsibly.
Avoid the mistakes stated above to favor your financial wellbeing.
