Ultimate Credit Card Mistakes You May Be Making!

Credit cards can be amazing when trying to building your credit, record keeping, and looking to earn rewards points. But credit cards can be crucial if your not taking the right steps, to balance and avoid credit card mistake.

Nearly half of America or about 120 million people, currently are in credit card debt according to http://creditcard.com Which shows a lot of people are making credit card mistakes. Analyst for Creditcard.com Ted Rossman said Millennials are suffering financially now than the pervious generations.

The increase of spending starting early April, 2020 from the Covid-19 impact, with mandatory lockdowns and unemployment all around led to credit card debt for 23% of Americans.

If someone asked you right now what’s your credit card debt, could you tell them or would you have to look around for it? If you know it good, it means your keeping up with your expenses!

This will be all about the 5 most common credit card mistakes.

Avoiding Credit Cards In General

If your someone that tries to avoid credit cards because you’ve had an bad experience with them in the past. It’s understandable! But with doing so you limit the benefits of having a credit card. One of the best things having a credit card can do for you is build your credit.

Good credit can have an influence on many things in your life. 4 Things Having Good Credit Can Do Is:

1. Save money when applying for insurance. (Car insurance and home insurance for examples.)
2. Establishes a history of trust for future creditors such as banks, when you need to borrow money.
3. Qualifying for Higher Credit Limits and Lower Credit Card Interest.
4. Freedom of choice when picking your dream home.

Credit cards also come in handy when your tracking you expenses. If you have a credit card then your receiving credit statements, which is already a break down of your monthly expenses saving you time! Credit statements are a plus when trying to track when, where, and how much your spending. (a timesaver for when tax time comes)

Not Knowing The Terms And Conditions

Knowing the terms and conditions is a must to avoid credit card mistakes. It’ll help you know what you should and shouldn’t do with your credit cards.

Here is a list of the most common Terms and Conditions:

• Annual Percentage Rate– The price you pay yearly for money that you borrow through credit cards, loan or another line of credit. The APR is the rate you pay as a whole for that loan or balance.
• Penalty Annual Percentage Rate– A high interest rate that is placed on your credit card, if you are late making payments. The APR usually kicks in 21 days after the end of the billing cycle.
• Foreign Transaction Fee– Fee for purchases made out side of the United States. Typically 1%-3% of the value of your transaction. (Paid in U.S dollars)
• Cash Advance Annual Percentage Rate– A short term loan you can take out against the available balance that you have on your credit card. Typically 3%-5%, and the charges are often higher.
• Balance Transfer APR– The interest rate you’ll pay on balances you transfer to your credit card. Issuers charge an interest rate to your APR which determine the amount of money you pay monthly, to carry a balance over.
• Balance Transfer Fee– Allows you to move high interest debt to another card of lower interest. Usually 3%-5% of the amount you transfer.

Making Only Minimum Balance

Credit card issuers try to make it convenient for consumers by allowing you to pay a minimum portion of the balance you owe. You must pay this amount that is due by a certain due date. This can be an awesome perk especially during times your short on cash, but it can allow you to become too comfortable while most of you balance remains unpaid.

It can also make some people feel like “oh well, I paid at least the minimum. I’m fine.” Which can put you in greater debt lasting years and higher interest rates, if your not paying off your credit card debt.

It’s best to pay your balance off entirely. But if you can’t do that your next best step is to try to send in as much as possible. You have the option of making payment plans. Make sure to be consistent with your payment plan to avoid racking up interest fees.

Additionally paying only the limit leaves you with less available credit. Carrying a remaining balance puts you at risk of hitting your credit limit which will lower you credit score, because you appear to be living above your means. It’s recommended that you aim to carry a balance of no less than 30% of your credit card limit.

Now if your card has a 0% APR period, you don’t necessarily have to pay more that the minimum payment recommended. 0% APR period allows you to make purchases without accumulating interest for whatever that set period of time is.

Paying Your Statement Late

A big mistake many people make is not paying their payments on time. The best rule of thumb for this is to pay your balance before the statement due date. Not doing so can do a huge number on your credit score.

The good news is there is a way you can minimalize the harsh effects of not paying on time. For example: If your only behind by say one day, you still may be hit with late fees and penalties. But it won’t ruin your credit score since it only gets reported on your credit report if your 30 days or more late.

If this is your first time being late your card issuer may waive your late fee!

To avoid missing out on future payments you can:

• Set up auto pay
• Install payment reminders
• Pay as often as possible
• Set up a more convenient date

Maxing Out Your Cards

It’s never a great idea to use up most or fully max out your credit cards. Anytime you get close to your credit limit it can put you at a very high utilization rate. Which puts you at the risk of over-limit fees.

An Over-Limit Fee: Is a penalty charged by you credit card company when cardholders purchase exceeds the credit limit.

It can also cause your future transactions to be declined due to insufficient funds and your minimum payment to increase with out warning.

But say an emergency comes up and you have no chose but to max out all of your available credit, you can eventually recover as long as don’t avoid paying back the balance and staying on track.

The goal should always be to keep your utilization lower to keep a over all healthy credit score. You can consolidate your debt into a personal loan that offers you a lower interest rate.

You can use a debt repayment calculator to get a better understanding of your finances.

*Remember if you aren’t bringing in enough money to cover your balance, then it’s probably best not to use your card better yet max it out.*

If your looking for ways to master your budget checkout: https://lifewithnay.com/?p=945