Credit cards can be amazing tools for consumers. They allow us to reward ourselves for making everyday purchases. They give us benefits that debit cards just can’t match. Unfortunately they can also be trouble if not used the right way. You can end up paying high fees and have your credit ruined. Here are five of the worst credit card mistakes that can be made.
#1 – Failure to pay
The worst thing that you can do is to not pay your bill. It’s likely that the interest rate on your account will skyrocket, you will face a growing amount of fees and your credit score will take a quick dive. Sometimes people can get themselves into a financial bind. They might have lost their job, or they have mounting medical debt. If money is starting to get tight and it’s causing you to miss credit card payments then it’s important that you call the issuer. If you let them know your situation then they will probably be willing to work out a plan for you.
#2 – Opening to many cards at one time
You probably get a couple handful of credit card applications in the mail each day. Don’t let all of these great offers tempt you too much. Signing up for one or even five cards will not ding your credit score that much, but it looks bad to lenders. For Example, let’s say you are looking to buy a home and the bank sees that you have four other lines of credit in the past month. They are going to be much less likely to want to give you a loan.
#3 – Late payments
Paying your credit card late isn’t quite as bad as not paying it at all, but it can still lead to a lot of bad things. You can be charge late fees, interest charges and be bumped up to the penalty APR. Most credit card companies will you give you the option of automatic payments. They will give you the ability to schedule payments to be drafted out of your bank account on a set day each month. By setting up these automatic payments you will avoid missing a due date on any given month.
If something happens and you do miss a payment, call the issuer and ask them to waive the late fee.
#4 – Going over your credit limit
Going over your credit limit on multiple occasions does not help. It’s shows lenders that you might not be the best person to loan their money to. If you are going to be looking for a line of credit such as a mortgage it will almost always cause you to get a less than ideal rate on the loan. Make sure you keep your credit utilization below 30% at all times.
#5 – Co-signing an application
One thing that you should never do is co-sign any type of financial debt. It could be a credit card or a loan. The only persons spending habits that you can control are your own. By co-signing a credit card application you are putting all your faith in that person to pay off their balance each month. If they were to stop paying on the account then it will negatively affect their credit, but yours as well.
Wrapping it up
Even though credit cards can be amazing tools for consumers they can also be a danger if not used properly. By making sure you stay away from all of these mistakes that people make with their credit cards you will avoid unnecessary fees and a negative impact to your credit score.