“Credit” is an excellent word used for loans. Most of the people do not consider the fact that credit card debt is a loan rather than free money. Consumers often borrow money to pay their existing debts. However, borrowing money is not the solution and it can even pile up interest you need to pay on multiple credit cards.
Start with a differentiation. It’s a “borrowing card” instead of a credit card. This minor change will help you control your spending habits. Let us find out some common credit card mistakes that could cost you money.
Top 5 credit card mistakes to avoid
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- Multiple credit cards: Having too many credit cards is the first and most common credit card mistake people commit. Do you really need another credit card? Having multiple credit cards makes it difficult for you to stop. What if you used all of these cards for products or services you don’t even need? Get rid of any extra credit cards and for most of the people, having 2 credit cards is more than sufficient. Moreover, applying for multiple credit cards can lower your credit score.
- Paying the minimum amount with late fee: Keeping balance and making minimum payment on your credit card is another common mistake consumers repeatedly make. With minimum payment, it will take considerably longer to pay off the debt and you would have to pay more interest on your balance.
- Ignoring monthly credit statement: Credit card statement states the date for payment and the amount that you need to pay. It will ensure that your card is not charged mistakenly because of an ID theft. Do not ignore your monthly credit card statement and file a dispute for any mistakes as soon as possible. The credit card statement will keep you posted on any new credit card terms and charges.
- Maxing credit card limit: Many credit card users tend to max out their credit limit because they do not check the credit statement regularly. Exceeding your credit limit time-and-again can damage your credit score. You are liable for over-the-limit and additional interest fees. A regular habit of exceeding this limit can affect your eligibility for loans.
- Using cash advance service: A lot of people choose cash advance for emergencies without considering the high rate of interest of these loans. You might have to pay an additional transaction fee for this cash advance. Cash advance services do not offer grace period and interest incur instantaneously. It is important to limit the use of cash advance for emergencies only. Get a loan from your family member or ask your creditor for an extension instead of a cash advance.
Credit cards are made for comfort and it is best to make a complete payment every month. If you are planning to improve your financial status, stop making these mistakes and take control of your life!