It is relatively simple to use a credit card sensibly and responsibly, without ending up in debt. However, you do need to know a bit about how credit cards work as well as the terms and conditions of your particular card. Despite using credit cards for years, however, some people still continue to make pretty big credit card mistakes, some without even realizing it!
Take a look at these credit card mistakes, just to check you’re not making any of them:
Mistake #1 – Only paying the minimum monthly requirement
Some people think that paying the minimum amount required every month is a way to save themselves some money and make owning a credit card cheaper. However, these people are obviously not looking at their credit card statements too closely, as when you don’t pay your balance in full each month, it carries over to the next month and interest is added. This interest can start to mount very quickly, making it near impossible after a while to fully clear your balance. If you pay in full and on time every month, you need never worry about interest rates.
Mistake #2 – Applying for a lot of credit cards at once
If you send out a wave of credit card applications at once, hoping to increase your chances of being approved, you might think that the worst that can happen is that you get a pile of rejection letters in the mail. What can actually happen is that each application and rejection is marked down on your credit file, making your chances of being approved smaller and smaller the more applications you make.
Mistake #3 – Never using your credit card
This one might not sound like a mistake at all, and some people think it’s a good way to avoid the temptation to overspend and end up in debt. What it actually does is damage your credit score, as not using your credit card at all means there is no activity on your credit file. Lenders like to see activity, where you use your credit card and pay back what you owe, so you need to establish a credit history. If you don’t want to use your credit card, you might want to close your account. Before you do so, consider making a purchase and then clearing your balance, just so you have something to show for the card on your credit file.
By avoiding these credit card mistakes you can avoid falling into the credit card debt trap and improve your credit rating.