A credit card can be an amazing asset. It can help you build your credit, expand your budget, and earn rewards. However, if you use your credit card poorly, it can cost a pretty penny. There are plenty of the biggest credit card mistakes you want to avoid.
For example, if you miss a payment, you will incur a late fee. The bottom line is that the costs do add up quickly. Though, it really isn’t hard to learn how to use your credit card properly. As a result, you can save money all while building credit.
You may even be able to take advantage of the great perks offered to you. To avoid making mistakes, let’s check out 5 of the biggest ones you need to avoid.
Why you should avoid the biggest credit card mistakes
Making any of the following mistakes could cause a lot of financial distress. In fact, studies show that the average Australian credit card debt was estimated to be $3258 per card. These biggest credit card mistakes can have a huge effect on your finances and even completely diminish your credit score.
1. Canceling your credit card
Cancelling your credit card when you’re finished with it may sound fine. However, it is the last thing you should do. Many people think it is straightforward, though it is often much more complicated than that.
Cancelling your credit card could lead to a decrease in your overall credit limit and an increase in your credit utilization ratio. In turn, this will have a significant negative impact on your credit. Try to avoid that at all costs.
Instead, you could speak to your credit provider about a product change. This way, you can get a better product that matches your financial needs.
2. Paying late
Everyone knows that paying late is one of the biggest credit card mistakes you can make. Late payments can stick to you like superglue and ruin your financial credibility. They stay on your report for seven years.
That is a rather long time to have to deal with one mistake. The more late payments you make, the more your scores will drop. The longer this goes on, the worse it gets. On top of that, if you wait long enough, your card will be charged off and your account will be sold to collections.
This is something you definitely want to avoid. If you’re worried about missing payments, set up reminders. You can also make them automated. Your credit will thank you later.
If you do struggle to keep up with repayments then an online personal loan might be a better route to go down. This way there is a clear repayment structure, unlike with a credit card.
3. Not monitoring transactions
This is one of the biggest credit card mistakes that no one seems to think about. Monitoring your transactions is such an important part of having a credit card. Make it a habit to keep an eye on your credit card transaction history.
You can do this by visiting your online account or reading your billing statement. If you notice a charge that wasn’t made by you, it could be a sign of fraudulent activity. It can be very expensive to ignore that. Keeping an eye on your billing statements is in your best interest to avoid the biggest credit card mistakes.
4. Too many applications
This is yet another of the biggest credit card mistakes. Credit cards can be a great tool. However, in excess, they can seriously affect your finances. If you want to maintain good financial health, don’t rush out and get many credit cards at once.
Each credit card application will trigger a hard inquiry. In turn, this will knock a few points off your credit rating. While one hard inquiry won’t do much harm, many will. On top of that, lenders will also see this behaviour and likely be put off.
They will usually think you’re seeking multiple forms of credit due to financial distress. That is why you should always be sensible when applying for credit.
5. Not knowing your terms
When it comes to your credit card terms, you need to stay on top of them. They aren’t an enjoyable read, but you could be hit with unexpected fees if you don’t read them. By reading the fine print, you will know things like:
- Introductory rates
- Balance transfer fees
- Other charges
There is so much you need to know. That is why the fine print was written, after all. Knowing your credit card terms can save you a lot of financial distress later.
The bottom line of the biggest credit card mistakes
Now that you know some of the biggest credit card mistakes, you can manage your credit far better. If your credit is in need of repair, contact Clean Credit today for the chance to improve your score and heal your financial situation. The team of experts at Clean Credit can help you improve your credit drastically.