5 Credit Card Mistakes to Avoid
In our everyday life, we spend so much on bills and other financial expenses that we feel like a superhero when we wonder how we have managed to keep things together. One of the ways you can stay afloat and not drown in expenses is by having a credit card account. A credit account is a type of account that allows you to borrow money from your account to cover your monthly expenses.
You are however required to pay back money borrowed with interest and other additional charges. The line of credit you can borrow depends on the level of your debt. You have the option of paying your debt monthly or after each statement cycle. The nature of a credit card account makes it easy to accumulate debt which could be difficult to get out of. It offers a continued balance of debt option which makes it easy to accumulate debt. To avoid this kind of debt situation with a credit card account, here are some tips on the mistakes you should never make with a credit card.
1. Maxing Out Your Credit Card
When you max out your credit limit, apart from the huge debt profile, you also have other issues to be worried about. You may find it difficult to obtain another credit card account because of your credit score. You will also attract an Annual Percentage Rate (APR) which will be charged on every late payment. It is advisable to set a limit to your account to caution you and prevent you from maxing out your account.
2. Paying Late
When you make late repayments on your credit card account, it damages your credit score and may put you in the bad books of your credit card issuer. A month’s late payment could reduce your credit card score by as much as 100 points. Imagine you are late for 3 months or more. You also stand the risk of accumulating APR on your late payments which increases your debt profile. The remedy to this is to ensure that you pay your credit card debt as and when due.
3. Minimum Payment Habits
There are minimum debt payments you are required to meet every month on your credit card account. however, it is not advisable to only pay the minimum payment every month. You are still susceptible to APR charges which will increase your debt profile. To avoid this, try as much as possible to pay more than your required minimum payment.
4. Not Reviewing Your Account Statement
One common and avoidable mistake you can make on your credit card account is to overlook checking your account statement on a regular basis. Reviewing your credit card account regularly allows you to know the status of your account and prevent reporting or charging errors and potential frauds from taking advantage of your account. if you cannot keep up with a weekly review, you should at least do a monthly account review to keep up with your bills and know the status of your account.
5. Having Too Many Credit Card Accounts
In the short term, this might be a good idea because it gives you enough options to source for lines of credit to cover your expenses. However, in the long term, what this means is that you will not be able to keep up with the accumulated debt on different credit card accounts. These accounts will also charge APR which means more debts. Also, when you apply for a new credit card, the card issuer makes an inquiry on your credit card and too many inquiries may spook your existing lenders. You can take advantage of Pre-qualification forms which give you the opportunity to check if you qualify for a new credit card without damaging your credit score.