Credit Cards:
Top 7 Mistakes That Card Holders Make
You need to manage your credit cards wisely. Otherwise, you
may end up in financial trouble. Unfortunately, there are
many who don’t realise that they may be making huge
mistakes with the use of their credit cards. Here are top 7
credit card mistakes that card holders make:
1. Paying Just the Minimum Sum.
The minimum sum is just an amount that you must pay back
each month to avoid defaulting on the debt. If you pay just
the minimum sum, the rest of your outstanding is subject to
interest computations. Always pay back more than the
minimum sum or make full payments to avoid credit card
debt.
2. Making Late Payments.
If you don’t set up any kind of automatic debit payment
from your bank account, then it can be tempting to just put
your credit card bill aside and get to it when you have
time. Before you know it, a few weeks have gone by and
you’re late. If you leave it to the deadline, you may find
that the payment won’t get there quickly enough.
Paying late is a big mistake for an awful lot of reasons.
You will almost certainly be charged a late payment fee,
and your late payment will go on your credit report. You
may also find that you lose any good rate you had or any
preferential rates that you may in the future receive.
To avoid late payment, you should always post your payment
a long time before the due date (at least a week). If
you’ve left it to the last minute, phone up and try to pay
that way.
3. Being deceived by Offers from Credit Card Companies.
It is never, ever worth getting a higher-interest card
simply because it offers some kind of loyalty points,
flight miles or whatever. Even if it offers a cash reward,
it is unlikely to be more than you would pay in extra
interest – after all, why would they give you free money?
4. Collecting Cards.
Some think it looks good on them to have a wallet choked
full of credit cards. Especially if the wallet is packed
with gold and platinum ones. But envy not! These card
holders may well in a situation of having to keep track of
all the different cards, balances and interest rates.
In fact, you should limit yourself to a maximum of three
cards at a time. Any more starts to make you look
over-committed in your credit report, and could get you
turned down for a bigger loan.
5. Charging More to Earn More Points.
The credit card companies are clever in rewarding you with
more bonus and loyalty points if you charge more during a
promotion period or a holiday season. You may end up with
shopping that you don’t need just so as to earn more
points. If you can well afford all your purchases, fine!
But if not, you may be in for a massive headache when your
bill comes!
6. Using Your Credit Limits to the Max.
Your limit is a maximum limit; not a minimum one! Whatever
you do, don’t get a card and immediately spend your whole
limit. This looks very bad. It is better to spend about
halfway regularly and pay it back.
7. Not Reading the Terms and Conditions.
Finally, as ever, don’t sign anything you haven’t read! I
know it can be tough to read all the fine print but if you
do not know what you are getting into, then you shouldn’t
get the card. Pay special attention to any future increases
in rates, and what kind of fees you can be charged.
Elaine Lim used to be a research analyst from a bank and
now hopes to share her expertise through publishing
information on consumer credit. She hopes to help others in
their financial planning, debt management and credit
repair. For more free tips and resources, please
visit http://www.credit-cards-eguide.com.