How you can avoid making credit card mistakes
Life without credit cards is next to impossible in the present world. However, you should avoid making mistakes unless it'll be harmful for your financial situation.
Here are some of the ways to avoid committing some common mistakes while using credit cards.
Take advantage of credit card rewards programs
Some of the credit cards come with rewards programs which comes in the form of airline miles or cash back facility, which you can redeem for gift items or gift cards. The more you spend, the more benefit you'll be able to get. However, be disciplined and accumulate points so that you can redeem it when required.
Do not make only minimum payments on your cards
Avoid making minimum payments on your credit cards, as much as possible. It may seem to be the easiest solution when your financial situation is a little bit tight, but be careful of not making it a habit. The more balance you carry, the more interest payments you'd have to make.
Try to not take cash advances unless it is an emergency
Taking out a cash advance usually results in paying a high interest rate and a transaction fee. So, unless it's an emergency and there's no other way out for you, do not take out cash advance on your card. Similarly, do not exceed your credit limit as doing so, you'd have to pay a fee.
Remember that introductory rates have an expiry date
While going for balance transfer method and taking out a low interest offer, remember that there's always an expiry date. So, while taking out such a card, make sure you repay the entire balance within the low introductory rate period as otherwise, you'd have to pay very high interest rate on the outstanding balance.
Avoid making late payments on your credit card
Do not ever make late payments on your credit cards. Doing so, you'd have to pay late fees. So, if you pay by check, pay in advance so that you never miss out the last date of payment.
Perhaps the most dangerous mistake often committed by people is rolling over the credit card balance from one cycle to another.
Though it may not be possible for you to repay the entire balance at each billing cycle, yet don't make it a habit to carry forward your balance. Moreover, even if you cannot repay the entire balance at one billing cycle, try to pay off as much as you can, since the interest will be calculated on the outstanding balance you have. Doing so, you can avoid falling into debt problems and enjoy a stress-free financial life.
Read more on this topic: 9 Major credit card mistakes that can lower your score
Credit card sins: What they are and how to avoid committing them
It is true that life without credit cards seems to be impossible. However, we can surely avoid committing some deadly sins while using plastic money. Here are some of the dangerous mistakes we often commit and what we should do in order to avoid them.
- Taking out credit cards from nearly every stores - It will be a great mistake on your part if you say âyes' to each and every credit card offer you get from every stores. What happens is, every time you apply for a credit card, a credit inquiry is made, which in turn, may reduce your credit score by some points. This is because the creditors assume that you'll fall deep into debt by opening too many credit lines. Likewise, do not close multiple credit cards at once. It will reduce your credit utilization ratio as your available credit limit will get reduced, thus lowering your score.
- Buying each and everything with plastic money - If you have the tendency to get enticed to buy every other thing and that too, with plastic money, then the day isn't far you'll fall into financial problems. It's a psychology that you tend to spend more when you pay with credit cards. So, try to avoid paying with a credit card, as far as possible.
- Using your credit card limit to the fullest - Do not spend till the last amount of your available credit limit. If you do so, then your debt-income ratio will be increased. The closer you reach to your credit limit, the less you'll be creditworthy to your potential creditors.
- Feeling shy to let creditors know your actual financial situation - If you are facing problems in managing your credit cards at the present interest rate, do not feel shy to discuss your financial situation with your creditors and request them to reduce the rate of interest. You may also ask for payment extension if there's some financial emergency and you're struggling to manage with your income.
- Not checking credit reports at regular intervals - Do you feel that checking credit reports is not necessary since you pay back your loan balances timely every month? If yes, then you're making a serious mistake. This is because you never know whether or not there are any mistakes in your credit reports, which may lower down your score. So, make it a point to check your credit reports at regular intervals and dispute incorrect negative items, if any.
Along with this, you should make a promise to not roll over balances from one credit cycle to the other. Yes, sometimes, you need to do this when you buy a big price item with a credit card. However, it should be kept in mind to not make it a habit. If you do so, you fall into the prey and will often land yourself into debt problems. So, do not go on spending since you don't have to pay now. Always remember, what you're spending, you'll have to pay back the amount - either in this cycle or pay interest along with paying back the original amount. It is your life; so, the decision is yours - whether to fall into debt to manage credit cards responsibly and lead a stress free life.