Credit cards give you the means to do things with your money you wouldn't be able to do otherwise, but they also allow you to get into a great deal of financial trouble. Whether you have one credit card or a dozen, you need to watch out for these mistakes.
Mistake #1: Having a dozen credit cards.
Too many credit cards means it is too easy to get too deep into debt. If you're getting more cards because all your spare money is going toward paying off your current cards, you have too much debt. It's time to look at cutting back on the fun stuff and lowering your debt levels.
Mistake #2: Letting your credit card limit get too high.
Sometimes your credit card limit is higher than it should be because you asked for that much. Other times it is because the credit card companies see you as a good risk and are hoping you'll spend more with a higher limit. In either case, don't fall for this trap! Keep your limits down to where you can pay your cards off in a reasonable time. If a credit card company keeps raising your limit beyond where you are comfortable, call them and ask for it to be lowered! It's probably not the most common request that they get, but it can be done.
Mistake #3: Getting cash advances.
Yes, sometimes you do need cash, but have you looked at how much more a cash advance tends to cost? Not only may the interest rate be higher, but you'll be accruing interest on it from day one. That's right, there's no grace period on cash advances. That money is costing you more money than you might be planning for.
Mistake #4: Maxing out your cards.
If you're doing this, it's time to take a look at your spending habits. Something needs to be cut back or you need to earn more money!
Mistake #5: Late payments.
Have you taken a look lately at how much a late payment costs you? Do you know what constitutes a late payment? Did you know that if your payment arrives on the right day but after the cutoff time (often 1:00 p.m.), your payment counts as late?
Not only are late payments expensive in terms of fees and an increased interest rate for that credit card, if your other credit cards catch on that you made a late payment to someone else, they'll raise your interest rates outrageously too! If you can set things up so that you pay at least the minimum automatically each month, you'll be in good shape. However, see the next mistake about minimum payments.
Mistake #6: Making only the minimum payment.
Talk about a poor use of your money! If all you can make is the minimum payment, you'll be paying on your credit card for a very long time, even though many companies have recently increased their minimum payments recently. It will cost you more than the original debt itself in interest payments in many cases.
However, as stated in #5, having at least the minimum paid automatically is a good idea. That will keep you from having late payments, and you can always send in more than the minimum on your own. Paying the minimum automatically is a good safety belt for avoiding late payments, but it's not the best way to handle your debt in general.
Mistake #7: Not checking your statement.
Do you know how easy it can be for incorrect charges to appear? Perhaps you've heard some of the news stories about credit card information being stolen from this company or that. It's all too easy for someone with access to stolen credit card information to charge something for your account, so it is up to you to be vigilant!
But don't stop at checking the individual charges. Pay attention to your interest rate. If it goes up, call and ask why! Same for any fees you think were inappropriately charged.
Mistake #8: Having someone else on your account.
Now, this can work out just fine if you are both good about how you use the credit card. In fact, it is not at all uncommon for a husband and wife to share a card. But if one abuses the card this can lead to a lot of problems. Think long and hard about whether sharing one account or paying on two accounts is really the best way for you to go.
There are plenty of other mistakes you can make with your credit card, but these are some of the most common. Use your credit cards wisely and you can build your credit history well.
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