Let’s face it, credit cards are intimidating and there is a ton of information out there about how to use them. If you take a look at some of the statistics, you will find that a lot of people are not using their credit cards correctly. The problem is that there is a ton of information out there and it is all over the place.
Here you will find a list and checklist of the common credit card mistakes that people make. This list will give you an evaluation so that you can have a clear mind when it comes to credit card mistakes. Also, as a bonus I will clarify on 8 myths about credit cards that you might want to know as well.
10 Credit Card mistakes you don’t want to be doing
Falling for misleading credit card offers
Whenever we are given an offer we usually get anxious and think OMG I need this and if I don’t get this I will miss out… STOP!
A mindset to get right now that will help you throughout your life is to never think you need anything. Before you look at or listen to any offer say to yourself I don’t need this. It is only when you are not in need is when you become rational with your decisions.
Credit card offers have what they are trying to catch your attention with in bold at the top. Ignore what is bolded and read through the rest, and afterwards read the bolded text. You will be able to determine if this offer is for you or not.
So, approach the offer from a “not in need” point of view. Make sure you read through everything else on the offer before the bolded eye-catching statements.
Paying only the minimum amount due
It would be helpful if they would express it in more detail. Instead of only saying the minimum amount due, why not add the rest of the sentence… the minimum amount due to prevent paying a late fee.
If you pay the minimum or not and leave money unpaid on your account it is considered a carried balance. A carried balance will get interest charges, so paying only the minimum amount due will only save you from an additional late fee.
Keep in mind, the longer you keep the carried balance and continue to only pay the minimum amount due the more interest your will be paying. You are only doing the credit card companies a favor.
Maxing out your credit card
A credit card is a way of building credit or trust. Whatever you do with your credit card is a way of evaluating how trust worthy you are.
Taking risks like maxing out on your credit card limit might be held against you. Your credit score might drop significantly. A good utilization percentage is around 30% of your credit card limit.
If you need more details on this matter this is a great resource by Brittney Myers on the risks of maxing out on your credit limit.
Late payments
A credit card should never be to buy things that you can’t afford at all. Making a late payment means that you weren’t able to pay off what you used your credit card for.
Making this mistake makes you worse than the person only paying the minimum amount due. You have to pay the late fee, interest, and your credit score will drop.
I always look at it this way, only buy something if you are absolutely sure you will have the amount to pay it off by the due date. If you don’t normally make late payments then you are probably making mistake #10 on this list.
Ignoring your credit card statements
I don’t know about you, but I surely don’t want to be paying for things I never purchased or asked for. Make sure to check you statement for any errors.
If you think this will never happen to you and that you have it all in place, check out the statistics for yourself.
This article mentioned that 27% of 30,000 credit card complaints involved an issue with a purchase on their statement. Around 8,100 cases, and these are those who actually review their statements.
It should only take you 2 to 3 minutes to look over your statement.
Applying for too many credit cards at once
I am going to leave this one up to you to decide on… If you see someone eagerly applying for credit cards left and right, what is that a sign of?
It is going to hurt YOUR credit score and raise red flags on whether you should be trusted or not. I have a trick that will get you credit card offers that are already pre-approved.
If you haven’t noticed, whatever you search for online is used to determined what kind of ads to show you. So, let’s take advantage and search for the credit card features you are looking for in a credit card offer.
Two weeks later, boom, you will find an offer in your mail for a credit card. Trust me it works all the time for me. I also explain this method in my YouTube video on how to use a credit card wisely and make money.
Closing credit card accounts without considering the impact
Well if you are making mistake #8 you probably don’t know this, but how long you have a credit card account open is important for your credit score.
Also, when you close a credit card account you lower your available credit which will end up increasing your credit utilization ratio. You don’t want your utilization ratio to be high because it will negatively affect your credit score.
The best bet is to not close a credit card account unless it is absolutely necessary.
Not monitoring your credit score and report
Are you not sure why you credit score is dropping? Well… your credit report will have the answer.
If you want to increase your credit score this is a great resource to get that done. Keeping an eye on your credit score updates will open your eyes to a lot of opportunities to enhance your credit score growth.
Also, your credit report will tell you exactly what is hurting your credit score. So, if you want to improve your credit score consider checking your credit report more often.
Using your credit card as a loan substitute
A credit card should never be used as a substitute for a loan. The interest on credit cards are a lot higher compared to interest rates on loans.
Plus, loans are made for the purpose of paying them back as instalment payments over a period of time. Credit card interest is more like a penalty for not paying off your balance on time.
However, I have a video where I go over how to use a credit card to help pay off your student loans or whatever loans you may have.
Always ask a professional financial adviser before making decisions that might cause damage to your finances.
Failing to inform your credit card issuer when you’re struggling with payments
Just asking a question may solve all your issues, but most of us fail to do so. If you are always paying your credit card debt off on time and have a great credit score, you are a trust worthy person.
If you fall behind because of some emergency or event that happened, there shouldn’t be a reason why your credit card issuer won’t discuss some solution to fix the situation. It can save you tons of money…
It is their job to assist you when you need help, so ask for it!
8 myths about credit cards
Having many credit cards will hurt your credit score
No, the number of credit cards doesn’t impact your credit score. It is the way you manage your credit cards that will hurt your credit. If you manage your credit cards well then, your credit score will not be affected.
Using a debit card is always safer than using a credit card
Using a credit card is an extra layer of protection when making purchases. Also, when you use a credit card you get an extra check on the charges when you come to pay your credit card bill. So, using a credit card lowers the risk of fraud.
Closing a credit card will immediately improve your credit score
Closing a credit card might actually negatively affect your credit score depending on two factors. The length of time the credit card account was open because the older the account is the risker it gets. The amount of available credit decreases which increases the utilization ratio. The higher the utilization ratio the risker it gets when it comes to your credit score.
Credit cards are only for people who are in debt
Although credit cards can help those who are in debt and I have a YouTube video on this, but credit cards are also a great resource for everyone.
Credit cards can make some money through bonuses and cash backs. Also, credit cards help you gain trust which will help you get accepted easier for mortgages and get hired for jobs.
You should always avoid credit cards to stay out of debt
I know a lot of people who were up to their knees in debt and a credit card helped them get rid of it. Personally, I have used a credit to help me pay off my student debt. Not only that, but it also helped me pay almost half the cost of college which saved me from a ton more of debt.
Paying the minimum balance is enough to stay out of debt
The minimum amount due is only preventing you from paying the late fee. You will be charged interest and it will accumulate fast if you don’t take care of the overdue balance. So, no, only paying the minimum is a fast way of getting into a whole ton of debt.
You can’t dispute charges on your credit card
The ability to catch a charge mistake and dispute it is one of the reasons I love credit cards. Anytime you have an issue with your credit card you should give them a call and get it resolved. It their job, and your right!
It’s necessary to carry a balance on your credit card to build credit
There is nothing worse to do with a credit card balance than to carry it past the due date. You will accumulate interest and it will keep on growing and growing until your credit score drops drastically.
The best way to carry a balance and not get penalized is to get a credit card with a 0% APR introductory period. In this case you will be able to pay off the balance until the period of 0% APR is over.
Conclusion
Having knowledge about what to do and what not do with credit cards is important. While information about credit cards is a ton out there, being able to have a concise list or checklist will help clear your mind. I also have another post you might want to check out on some strategies that will help play the credit card game wisely.
So long…