Mistakes Not to Make
The best way to avoid credit card debt or a bad credit history is not to make the mistakes that lead to them. The best time to learn about the dangers and risks associated with credit cards is when you first begin to use them, before you have developed a credit card history. Of course, even an experienced credit card buyer can benefit from learning how to avoid credit card pitfalls.
Paying Fees
The easiest fee to avoid paying is an annual fee. You can simply find a card that does not charge an annual fee. Be aware that most cards also charge fees for cash advances and transferred balances. Some cards even charge fees when you use the so-called courtesy checks that they often send you, as these are considered to be a cash advance. The best idea is to not use your credit card for anything other than direct purchases unless absolutely necessary. If you do find that you need a cash advance or other use, be sure to ask about the fees before you make the transaction.
Late Payments
Late fees can lead to many unpleasant consequences. Not only will you be charged a fee if you make a late payment, but the credit card company may raise your interest rate. This can happen after even a single late payment. And subsequent late payments could lead to further rate increases. Even more importantly, your late payment may be reported to the credit bureaus, leading to negative mark in your permanent record. Even years later, this could impact the rate you receive when applying for any type of loan or credit. It could even have an impact on whether you qualify.
Teaser Rates
Most credit cards offer lower interest rates that only last for a certain time period. This period may be as short as a few months. At the end of that period, your interest rate on any credit card balance you have could rise dramatically. You need to read the fine print to find out what your APR will be after the teaser rate period ends. Keep in mind that this is actually the interest rate you will have on your card in the long run.
Carrying a Balance
The biggest mistake that credit card users, especially new ones, make is to charge things that they can’t actually afford to pay for. Our society tells us to “buy now and pay later.” When you can’t actually pay the full amount, that amount is carried on your credit card as a balance. This balance is then charged interest daily, which leads to a compounding debt. Even if you pay the minimum amount on time each month, you will find that your balance owed steadily rises. Eventually, those amazing shoes or that stereo system that was such a great deal will end up costing you far more than you actually were charged for them. The best habit you can possibly get into is to charge only what you can afford to pay for each month and pay your balance off in full at the end of the month.
Missing Out on Rewards
Credit cards offer amazing rewards these days. Whether its points, discounts, or cash back, most of these programs come with deadlines. If you don’t pay attention to when these offers expire, you may miss your chance to actually redeem them. Always keep track of any points you have and check for the expiration date on any offers that come with your credit card.
The most important thing is to be aware of all of the policies, fees, and deadlines for your credit card. Always read the fine print, and don’t be afraid to call your credit card company whenever you have any questions.