Almost everyone has at least one credit card, and there are many more that have several. When they first get them they are excited at being able to have extra resources to be able to make purchases with other than with having cash. Soon after that joy can turn to disappointment and frustration because there are a lot of mistakes that can be made with these and most of them are costly ones.
Mistakes To Avoid
Its never too late to learn. Some of these mistakes if you have already made them there is not much you can do to reverse what potential damage the mistake may have done. But, for others it’s not too late to avoid them.
Getting Rid Of Your First Credit Card
A lot of young people start out with their first credit card with a student credit card. Then after a while, they want to go with other cards so they may cancel that first card they had. This can be a mistake. This first credit card is what started building the credit card history and its good to maintain this history by keeping the card active.
Who Cares About The Interest Rate?
When a lot of people are applying for a credit card all they care about at first is that they are going to get approved for it. They don’t pay attention to what the interest rate is going to be. Or they assume that all credit cards are the same, so it doesn’t matter. This is not true although most of them are very close in their rates. Bur, where the big difference comes in is what the extras are that are being offered with the card. These can make a big difference. It can be a pain reading the lengthy contracts but you should never enter into any agreement without knowing its contents.
Not Keeping Up With The Payments
When you accept a credit card you are agreeing to the terms of the contract. You are obligated to make the payments. Basically the credit card company is loaning you money each time you use their card to pay for something. You are not only required to make the payment but are required to do so within the designated time. Your monthly statement will tell you how much you need to pay and when. If you don’t do this then it adversely affects your payment history which in turn can affect your credit score.
Paying The Least Amount
You will find that when you get your credit card statement that it will tell you what the minimum payment is that is due. That doesn’t mean that is the only amount you can pay. You can pay any amount you want as long as it is at least the minimum amount. You really need to understand the consequences of only paying the minimum amount. When you do this you are not paying anything on the principal amount that you owe. So your initial debt is compounding. If you are finding that you are consistently not able to pay more than the minimum amount then look for some other alternative to pay this credit card out.
Being Too Liberal With Your Credit Cards
It is nice to know that you may be carrying around several thousand dollars in your wallet or purse even though it is in a plastic form. This may create a tendency in you to buy items or pay for services that you would not do if you didn’t have these cards. This is one of the most common mistakes that a lot of people make. This is the beginning of how credit card spending can get out of control. Make it a rule that if you can pay out the purchases you put on the card by the end of the month then don’t buy it. Or if you are making a fairly large purchase then you don’t use the card again until this is paid out. If you set these two rules for yourself then you will have good control of your cards.
Letting Others Use Your Credit Card
Some people are very liberal with their money and they carry this habit over with their credit cards. If they have friends or family that need something then they won’t hesitate to put this purchase on the card. Perhaps the individual has promised to pay this back. Keep in mind that you are going to be paying the interest on this till they do. So not only are you footing the bill for the purchase but for the interest it’s going to cost you as well.
Not Checking Out The Extras
The credit card industry has become a very competitive one. This has worked out well for the consumers because these institutions are competing against each other for your business. This is where the rewards and extras come in. These have become really important as there is a whole variety of them. They can include points, cashback, or travel rewards just to name a few. Make sure when you are going for a credit card that you not only look at the interest rates but the extras so you choose one that suits you the best.
Credit cards can be a good thing as they really can help to establish your credit rating. Which is going to be important when you are applying for credit. These mistakes can create the opposite however by really damaging your credit rating. So the bottom line is to choose your cards wisely and use them properly.
Another area where you need to put your attention is making sure that your tax obligations are up to date. If you have any problems with your taxes or are in need of help with their filing be sure to contact me.
