Here at Brunswick Plantation & Golf Resort, we think smart spending should be a way of life. We strive to help our neighbors and others do just this. This post identifies credit card mistakes; how and why to avoid them.
Almost everyone has a credit card or 2 or 3 these days. We all receive offers from them everywhere we look. There are about 1.5 billions credits cards being used in the U.S. today! But remember, credit cards are a business service you choose to use. Don’t play it straight and you will pay and sometimes big! Considering this, take a look at this list of credit card mistakes and their penalties.
Credit Card Mistakes 1. Late Payments
Set yourself up for success by using auto payments to to card or get reminders via text/email. Always pay your card on time. If you don’t the following penalties will be levied:
- no payment within 30 days….”late” report sent to a credit reporting agency
- late fee assessed against you
- negative info on your credit report for 7 years (FYI payment history = 35% of your credit score)
- higher interest rates on purchase in future
- risk higher rates or rejection from other credit sources
Credit Card Mistakes 2. Minimum Payment Only
Don’t fret if you pay the min occasionally..but don’t make a habit of it. FYI; paying only the min can actually make your debt higher and take longer to pay off in certain situations.
Credit Card Mistakes 3. Charging close to your credit limit
Sometimes life events may necessitate the need to charge a large amount. If this happens, pay off the balance as soon as you can. Your credit score is largely determined by how much credit you actually use (30% of your score based on this). Using more than 10% of your available credit for long periods will hurt your score. Lower scores equal higher borrowing costs.
Credit Card Mistakes 4. Using Cash Advances
Cash Advances are really expensive forms of credit. Many times they are 10 to 15% higher than your card rate. Only consider cash advances if you cannot get a personal loan from your bank or other lending institution. Also, make sure you really need the money. Never use cash advances for discretionary purchases.
Credit Card Mistakes 5. Closing old credit card accounts
You might feel good about closing a credit card account after paying it off, but wait. When you close the account your available credit has just declined by whatever your limit was. This has the effect of increasing the percentage of credit you use on your overall availability. We have just learned that over 10% credit use is seen as a negative. So do the math first.
Credit Card Mistakes 6. Ignoring the fine print
Everyone has seen those 0% interest rate deals offered by companies trying to get you to switch. Beware the fine print though. Look to see what the post promotional rate is. Also, note what penalties you face if a “principal” payment is missed. Also, most intro offers will automatically end if you miss or are late on a single payment.
Credit Card Mistakes 7. Not Negotiating
Do you have a balance and haven’t asked for a rate drop in the past 6 months? Call your credit card company as ask for a reduction. It helps too if you have info on other card rates you could get. The worst that could happen is they say no. There is a lot of competition in this industry and issuers will negotiate.
Credit Card Mistakes 8. Store Credit Cards
It seems like every cashier at the store is offering a deal today for signing up for their credit card. They have good reason to. This is a large income stream for them as people inevitably run balances and rack up fees. Stay away from these cards. If you can’t pass up the 10 or 15% off that day then make sure to pay off the card right away and put the card in a drawer out of sight.
Credit Card Mistakes 9. Not checking credit card accounts daily
We are used to checking our email and social media daily and more frequently. Most people don’t do the same with their finances. This can cost in terms of identity theft or credit card fraud or credit usage.
Credit Card Mistakes 10. Sending credit card information via email
The only thing worse than entering your credit card number on a random website is that of emailing it to someone. Hackers can get this info easily. Make sure your online purchases are from legit secure sites (secure sites have an https in url)