You might be having a rough time financially or perhaps just want to earn more rewards. Whatever your situation, credit card offers may seem to provide the perfect solution. But before you accept an offer- step back and take a deep breath. One card definitely does not fit all. This is especially true if you’re in a financial crunch. Adding on more credit (debt) may be the last thing you need to do. So take a moment to look at what most experts agree are the Top Eight credit card mistakes and avoid them if at all possible.
1) Having too many cards. You’d be surprised at how little thought most people put into getting a new credit card. But it pays to be cautious. Ask yourself if you really need another card. Generally the more cards you have, the easier it is to get deeper into debt. Credit cards aren’t free money. They come with fees and interest charges. Having too many cards can also negatively impact your credit score. Definitely look before you leap.
2) Ignoring the fine print. Let’s face it. You probably never read all the fine print that comes with a credit card agreement- but you should. It will let you know how long your introductory APR on purchases and/or balance transfers lasts. It will break down the fee structure- late fees, transfer fees, or foreign transaction fees. It will tell you what your penalty APR will be if you have a missed or late payment. These are all features that can cost you a lot of money- and claiming ignorance won’t help. Read the paperwork.
3) Not understanding introductory rates. Credit card offers often contain deferred interest deals which can lure unsuspecting consumers into a finance charge nightmare. Many times these are for big-ticket purchases such as appliances, electronics, or furniture. Be aware that interest begins to accumulate from the moment you make the purchase. Depending on the length of time of the introductory offer (6, 12, 18 months or longer), you are required to make a minimum payment each month which will be nowhere near enough to pay off the balance within the set time frame. So you are left with a substantial balloon payment that must be paid before the introductory time period expires or else all the accumulated finance charges are added on to your existing balance. Plus, if you are ever late with a payment it generally voids the offer.
4) Not shopping around for the best rate. Always try to get the best possible APR. If your credit isn’t that great, you’re not going to get the most favorable rates and terms anyway but it’s always smart to do some research.
5) Only making minimum payments. If you only make the minimum payment each month it will take you years to pay off your balance and you’ll spend hundreds if not thousands of dollars on finance charges. If you can’t afford to pay off your entire balance each month it’s a good indication that you’re living beyond your means.
6) Making late payments. This is bad news all the way around. Not only will late payments be reflected on your credit report and lower your score but you will also be paying a fortune in late-payment fees (normally $35+). Keep track of your payment dates or set up automatic payments. Do whatever it takes.
7) Going over your credit limit. Keep track of your balances. If you’re so close to your limit each month you may already have financial issues which need to be addressed. Credit card issuers charge hefty over-limit fees ($38+) so why keep throwing away money for no reason.
8) Unchecked spending. It’s a proven fact that people spend more when they use credit cards for purchases than if they pay with cash. There’s something about parting with cold, hard dollars that makes people more thoughtful about their spending. Try thinking about credit card purchases the same way. Go over your monthly statements and track your spending- where, how much, how often. Hopefully, it will be a wake-up call to stop buying things you don’t need.