Sign In/Sign UpTRENDING BASIC MONEY MANAGEMENT TIPS
TRENDING BASIC MONEY MANAGEMENT TIPS
11.10.2020 / Borrowing « Back to all articles
Common Credit Card Mistakes
When used correctly, credit cards provide plenty of benefits to consumers. They offer a source of funds when you're low on cash, and they can help you make big purchases that you pay off month-by-month. Some credit cards will also include rewards, such as airplane miles or cashback bonuses.
On the other hand, credit cards wouldn’t exist if they weren’t considered a profitable product for lending companies and banks. These profits come to fruition through some common miscues that anyone can be prone to make, especially without additional awareness of how credit cards work. To help you avoid these pitfalls, we offer here some common credit card mistakes to avoid.
Maxing Out Your Credit Card
It’s tempting for anyone to look at the maximum credit line provided by their credit card and think they now have that much money to spend. However, there are a couple of issues that stem from maxing out your credit card.
First, your credit score is likely to go down should you max out your card, even if you have low or no balances on other credit cards. Your credit score includes both individual and overall utilization scores, meaning that a maxed-out card can send your credit tumbling. This will make it harder to buy a car, rent an apartment, or purchase a home.
Further, carrying high balances on your credit card makes it more difficult to pay off each month. This means you’re now paying interest on your high balance. Each month of interest adds more to your balance, creating a debt cycle that’s hard to pull out of.
Paying Only the Minimum Balance Each Month
When you pay only the minimum payment, you are not doing much more than treading water with your debt. Very quickly, though, you can find yourself drowning in debt as the interest on your balance will accumulate into a tsunami. If you pay more than the minimum, even if it’s not the full balance, you could save yourself from hundreds if not thousands of dollars of debt over the year.
Using Your Credit Card at the ATM
Unlike purchases, which only gather interest if the balance is not fully paid at the end of the statement cycle, cash advances from your credit card will likely start accruing interest immediately. That means to pay back the amount you withdrew from the ATM the very next day, you’ll have to pay more than you took out.
If you need more cash than your checking account will allow, you shoulder consider alternative routes, such as a personal loan. Taking cash out at the ATM from your credit card is one of the quickest ways to find yourself dealing with unsurmountable debt.
Understanding Credit Cards
Credit cards are tools. When used correctly, they can help you achieve your financial goals. When used incorrectly, they are likely to cause harm. To make sure you're using your credit card the right way, avoid any of these common credit card mistakes.
Credit Talk
11.10.2020 / Borrowing « Back to all articles
Common Credit Card Mistakes
When used correctly, credit cards provide plenty of benefits to consumers. They offer a source of funds when you're low on cash, and they can help you make big purchases that you pay off month-by-month. Some credit cards will also include rewards, such as airplane miles or cashback bonuses.
On the other hand, credit cards wouldn’t exist if they weren’t considered a profitable product for lending companies and banks. These profits come to fruition through some common miscues that anyone can be prone to make, especially without additional awareness of how credit cards work. To help you avoid these pitfalls, we offer here some common credit card mistakes to avoid.
Maxing Out Your Credit Card
It’s tempting for anyone to look at the maximum credit line provided by their credit card and think they now have that much money to spend. However, there are a couple of issues that stem from maxing out your credit card.
First, your credit score is likely to go down should you max out your card, even if you have low or no balances on other credit cards. Your credit score includes both individual and overall utilization scores, meaning that a maxed-out card can send your credit tumbling. This will make it harder to buy a car, rent an apartment, or purchase a home.
Further, carrying high balances on your credit card makes it more difficult to pay off each month. This means you’re now paying interest on your high balance. Each month of interest adds more to your balance, creating a debt cycle that’s hard to pull out of.
Paying Only the Minimum Balance Each Month
When you pay only the minimum payment, you are not doing much more than treading water with your debt. Very quickly, though, you can find yourself drowning in debt as the interest on your balance will accumulate into a tsunami. If you pay more than the minimum, even if it’s not the full balance, you could save yourself from hundreds if not thousands of dollars of debt over the year.
Using Your Credit Card at the ATM
Unlike purchases, which only gather interest if the balance is not fully paid at the end of the statement cycle, cash advances from your credit card will likely start accruing interest immediately. That means to pay back the amount you withdrew from the ATM the very next day, you’ll have to pay more than you took out.
If you need more cash than your checking account will allow, you shoulder consider alternative routes, such as a personal loan. Taking cash out at the ATM from your credit card is one of the quickest ways to find yourself dealing with unsurmountable debt.
Understanding Credit Cards
Credit cards are tools. When used correctly, they can help you achieve your financial goals. When used incorrectly, they are likely to cause harm. To make sure you're using your credit card the right way, avoid any of these common credit card mistakes.
