You do not want credit card debt in your future. It can cripple your limited finances when you need it the most. It is not something that you should leave out of control. You have to start acting on it now because if you let it accumulate, it can become a very big problem, not just for you but for the rest of your family as well.
What puts you in debt are the credit card sins that you are making. It is not really the ownership of the card that puts you in trouble. It is how you choose to use it. There are people who have owned credit cards for years but have never had any problems with debt. That is because they have learned how to use it well.
The good news is, a survey done by Gallup.com revealed that Americans are starting to get wiser when it comes to credit card use. In 2008, only 43% said that they always pay the full amount of their credit card balance. In 2014, it went up to 48%. That means people are still using their cards but they are no longer keeping balances in their cards. That eliminates the debt and allows the cardholder to maintain a good credit score since they are using credit responsibly.
7 credit card holder mistakes you should avoid
It is not complicated to manage your credit card debt but it does require discipline and self control. If you do not have it, then you will not be able to avoid committing the credit card sins that will eventually ruin your financial wealth.
But what exactly are these sins that you should avoid? Here are 7 of the most common mistakes that credit cardholders make.
- Making late payments on your credit card due. This is the easiest sin to commit – paying your credit card late. It is also the most common. You need to make sure that you can pay your credit card dues on time because if not, you will be given late penalty charges. Not only that, it will cause you to carry over your balance to the next billing cycle. That will end up bloating your current balance because of the finance charges that will be added to it. That being said, it is a must that you pay your credit card debts on time – no excuses. In case you know that you will not make it in time for your due date, call your credit card issuer immediately. They can help set up a temporary extension if your reason for making a late payment is valid. Just do not make a habit out of it.
- Using your credit card to access cash advances. The second of the credit card sins that you need to avoid is using your credit card to make cash advances. This is a big no-no. If you find your credit card interest rate to be high, then the cash advance rates of your card might just give you a heart attack. It is so high that it is usually not worth it to use as a solution to get out of a tight financial situation.
- Maxing out your credit card limit. Another mistake that you can commit as a cardholder is maxing out the limit on your credit card. Not only will it be hard to pay off the balance immediately, it will also affect your credit score. It will ruin your credit utilization – which affects around 30% of your credit score. You want to make sure that your debt amount is kept low so you will not be in danger of falling behind on your debt payments.
- Failing to monitor your credit report. A lot of people do not understand how this can be one of the credit card sins. They do not pay attention to their credit report because they feel that it is unnecessary. Well that is where you are wrong. According to the statistics found on the website of the National Criminal Justice Reference Service, NCJRS.gov, 17% of the consumer complaints received in 2013 is caused by credit card fraud. One of the most effective ways to recognize identity theft is by monitoring your credit report. You can check out any new accounts opened under your name. You can also monitor your debt amount if it is reflecting purchases that you did not make. You will be aware of these if you only monitor your credit report regularly.
- Spending on credit when feeling an emotional high. A lot of use don’t realize that this is part of the credit card sins that you need to avoid. If you are experiencing some sort of emotional high, it is not advisable that you go shopping – especially when you plan on using your credit card. If you are bursting with happiness and you want to reward yourself, use cash instead. The same is true when you are stressed or distraught. When you use cash, you can limit what you will purchase. During these shopping escapades, leave your credit cards behind to avoid overspending.
- Applying for new cards to get rewards. While the rewards are also important aspects of your credit card application, make sure that your primary reason for getting the card is borne out of necessity. Do not apply for the card if you do not plan on using it.
- Ignoring the fine prints. Lastly, you need to stop ignoring the fine prints. Admittedly, they are tough to comprehend but if you have questions, you need to ask the customer service. Do not skip reading this before you apply for a card. It can lead to a lot of the credit card sins we mentioned here. You do not want to violate any of the credit card rules and be penalized for it. Be in the know and you will not have to be charged for violating the rules of credit card ownership.
Tips to keep yourself from negative credit card consequences
If you want to avoid committing credit card sins, it is a must that you learn how to use a credit card responsibly. Here are some of the tips that you can use.
- Budget what you will spend on your card. It is important that you include in your budget what you will spend on your card so you know what your limit is. The reason why we accumulate debt is because we fail to plan our credit spending. When you include it in your budget, you will know just how much you are allowed to spend and you can stop once you reach that.
- Pay the amount before the grace period expires. The grace period is the time between your purchase and the due date of the billing where it is included. When you pay the balance within this period, you will not be imposed with any credit card charges or interest.
- Maximize the rewards. We have mentioned that the rewards on your cards is important but it should not be the reason to get a new card. But if you have a card that you are always using, try to plan your spending so it maximizes any freebies or cash back rewards. That will add to your savings.
- Be in the know. This is very important. Learn about the laws protecting you as a credit card user. You should also be aware of any recent developments about credit cards. For instance, there is the campaign to use smart credit cards to avoid or lessen the threat of identity theft. EWeek.com reported that 37% of survey respondents about these smart credit cards said that they prefer chip and PIN cards over signing signatures. You need to be aware of these developments so you can choose the card that you will have. You can call your creditor to discuss your options to change into a more secure card.
In the end, the key to avoid credit card sins is to understand every aspect of the card. Be wise and responsible and you should be free from debt for the rest of your life.