Even though there are many advantages to having a credit card, without proper use this tool can cause you a lot of financial problems. A strong credit score can help you earn lower interest rates on auto loans and mortgages so use your credit cards wisely and take advantage of the reward programs and of all the other perks. But despite that, it’s so easy to misuse your credit cards so pay attention to the way you use this tools so you can avoid getting into debt. Here are 7 credit card mistakes that will literally cost you:
1. Late or Missed Payments
Try not to pay your credit card bill too late if you don’t want to get into debt. Otherwise, you will be charged with a late fee and your credit card company can boost your credit card’s interest rate. A late payment can also cause your credit score to drop since payment history accounts for 35% of your credit score.
2. Paying Only the Required Minimum
Even though when you get your credit card bill it’s more convenient to pay only the required minimum, this is in fact a big mistake because even though you will avoid a late fee, you will pay loads in interest over the lifetime of your debt.
3. Taking out a Cash Advance
If your credit card allows you to take out a cash advance, don’t do it, even if you are short on cash. You will be charged a fee for taking out a cash advance and your credit card company might charge a higher interest rate on the money you take out through a cash advance.
4. Not Utilizing the Benefits of Your Cards
When you read the fine print on your card, your should not only look for expiration dates or for hidden fees because you will find there plenty of benefits and perks that a lot of people miss. Almost all credit cards offer rental car insurance, extended warranties, purchase protection and even travel insurance.
5. Not Asking for a Break
Everyone pays their credit card bill late at some point. If you are short on money on a certain period of time, you could call your credit card issuer and ask them to waive the fees and interest. Sometimes, they might be willing to forgive a small mistake, especially if you usually pay your bills on time.
6. Having Too Many Credit Cards
Having more than one credit card can easily get you into debt especially if you love shopping. If you have too many credit cards, you can easily lose track of your spending so your overall credit limit can be reduced.
7. Using Your Credit Cards to Pay for Your Everyday Expenses
Try not to use your credit card to pay for necessities like groceries or gas because you might easily get into debt if you don’t keep track of your expenses. Plan your spending so that your credit card balance would never exceed the amount you can pay off completely.
Having a credit card can bring you a lot of advantages but at the same time, it can cause you a lot of financial problems if you don’t use it wisely. Do you know any other credit card mistakes that can cost you? Please tell us more about them in the comments section!