Credit cards can provide a major advantage to customers when used correctly, allowing them to make purchases even when they are in a financial pinch and pay them off later while also earning rewards and travel miles. Those who manage to pay off their balance every month will never have to worry about interest and will see their credit score rise. However, it is easy to worsen your financial situation tenfold if you aren't careful with how you use your credit card. This article will go over the major mistakes you should avoid when using your credit card to keep yourself financially secure while reaping the benefits of the card.
Only Paying the Minimum
Something that credit card issuers do to make using the card more appealing is allowing monthly minimum payments, often around $15, that you can pay instead of shelling out money for a larger amount. This is a trap you want to avoid whenever possible, as the interest on the card will build up if you keep making minimum payments and result in you losing money in the long run. Instead of only paying the minimum, budget yourself to pay as much as you can. It might make things a bit more inconvenient now, but it could save you hundreds of dollars over time.
Loaning Your Card
Loaning your credit card to someone can be even riskier than straight up loaning money to them. At least with money, you know exactly the amount you loan to them. With a credit card, you don't have any control over the purchases they make and you can be stuck with the entire bill, hurting your financial situation and your credit score. Be wary about who you loan your credit card to. You're better off just loaning it to no one.
A lot of credit cards will try to entice you to use them more often by offering rewards for every dollar you spend. Don't be driven to make purchases with your card in an attempt to get rewards, as they often don't make up for the interest payments you'll have to deal with if you don't pay off your monthly balance on time. Only take advantage of these rewards if you know you will pay off your balance in time.
Late or Missed Payments
This one seems obvious, but it still tends to get the best of many people. Make sure you know when your bill is due, even setting up a reminder on your phone or a calendar if you have to. Falling behind on payments will incur late fees that could have easily been avoided, and if you end up 30 days behind on your payments, you will see a negative impact on your credit score. Miss payments for 60 days or more, and your credit card might increase your interest rate, which will only add to your woes.
Some credit card companies might send you a check in the mail, encouraging you to use that check to pay your bills or buy something nice for yourself. Don't fall for it. The check they send is often no different than a cash advance and interest will begin accruing the moment you decide to use it, with no grace period whatsoever. If you receive one of these checks, shred it immediately. That way you won't be enticed to use it and you'll be able to throw it out without the risk of identity theft.
A credit card can be a powerful tool in your financial arsenal, but it's easy to fall into a trap with them and find yourself piling up debt. Avoid the mistakes listed in this article and practice your own self-control to avoid turning your credit card from a help to a hindrance.