When not used properly, credit cards often lead you into debt. The financial mistakes you make under the spell of the swipe stick with you for years. Credit card owners need to understand that just because there’s a high limit on their credit card doesn’t mean the same stands for their budget. While you are not spending out of your pocket, you will pay down the balance.
Credit cards offer various benefits, the most significant being applying for a loan. When you are in a financial crunch, it lends you a way out. It offers you rewards, such as travel miles, cash back, etc. All in all, you get to spend freely in exchange for good credit history and proof of stable income. However, this lure can get to people in ways they can’t imagine. That’s when they start to make mistakes and find themselves in debt.
Let’s take a look at the top three credit card mistakes you need to avoid and stay in the green zone:
Making Minimum Payments
We understand that saying “Pay your credit card in full” is easier than following this rule. However, by making only the minimum payment, you build up interest. Yes, it helps you avoid fees and penalties, but when the payments get higher, it becomes difficult to pay them down in one go, resulting in a negative marking on your credit report.
The longer the amount goes unpaid, the more the interest builds. Before you know it, you are thousands of dollars in debt, struggling to pay your bills because most of your money is being used to correct your mistake.
Not Paying on Time
Due dates are there for a reason. You have around 48 days to pay without interest in a single billing cycle. Whether you have spent $100 or $10,000, the amount will remain the same till the end of 6th week. The day the new billing cycle starts, you will be charged an interest of 16.65%.
A single missed payment will lower your credit score, and a negative marking will appear on your credit report. Since lenders use your credit report to decide whether you are eligible for a loan, your chances will be significantly reduced.
Not Reviewing Your Statement
How many times have you opened your bank statement when you received it in the email? Probably not many, and that’s your third biggest mistake!
Credit card fraud has become quite common. Sometimes, your credit reporting agency also makes mistakes. When incoming payments are not processed on time, they do not appear in your history. As a result, the credit reporting agency marks it as unpaid. This leads to a negative marking on your report, which you can dispute.
You must write a letter to the agency with proof, such as pay stubs, and request them to recheck your credit history.
In conclusion, make payments in full and on time to ensure you don’t incur debt. If you get a call from an unknown number claiming to be your bank’s representative and asking for details, disconnect the call and dial the number on the back of your credit card. Lastly, check your bank statement monthly and go through every purchase and payment to ensure they are correct.