Credit cards can be great if used correctly. They may help you make that big purchase you’ve been waiting for or help you build a good credit score, but if you’re not careful you could be doing more damage than good. Get informed about these dangerous credit card mistakes to make sure you aren’t making the wrong choices.
[Read: Five of the Top Money Saving Mistakes People Make]
You’re carrying a large balance over a long period of time.
Sure, credit cards are meant for borrowing money. What many people don’t realize is that just because you may have a high credit line, doesn’t mean you should spend the full amount.
- In order to keep your credit in good standing, you shouldn’t tie up more than 30% of your credit limit.
- Not only can it damage your credit score, but tying up a large amount of your limit leaves little room for emergencies in which you may need to charge your card.
- Using more than 30% of your limit can make applying for loans more difficult.
You only pay the minimum payment
It’s a common yet dangerous credit card mistake to make. Sure, it’s great to meet the minimum payment each month, but what many don’t realize is you really should be paying more.
- By paying only the minimum due, it will take you much longer to pay off the bill than if you put down a larger amount.
- In turn, taking longer to pay off the card results in paying more interest over time.
- In the grand scheme of things, you are actually spending more money than if you just put down more each month.
You miss the due date and pay late
Payment history is the single largest factor in calculating a credit score.
- Paying late can greatly affect your credit score, making you look like an unreliable borrower.
- It can bar you from future opportunities for loans and credit card applications.
- In addition to damaging your score, late payments result in late fees.
You throw out your statement with out reading it over
We’re all guilty of it, you get that monthly statement, scan it over until you find the bottom line, or you throw it out all together without reading it through. Many banks are pushing for paperless statements, which further decreases your odds of reading over the statement. What you don’t know is that in failing to read your statement, you are committing a dangerous credit card mistake.
- Without reading through your statement you could be missing charges that you didn’t make.
- Whether it’s a mistake on the credit card companies end or due to fraud, if you don’t double-check your bill you could be paying unnecessary charges.
- Another reason to read your statement is accountability. It’s a great way to monitor your spending.
You didn’t look into the fine print
It’s very important to read the fine print, on most things but especially when it comes to finances. With out looking into these details you could be committing a dangerous credit card mistake.
- You may be unaware of how interest is calculated on your card
- Late fees are often explained in the fine print
- Cash advance fees may be snuck into the fine print that you otherwise wouldn’t be privy to.
Take the time before signing up for a card or if you already have, before further spending, to know what you’re getting into. It’s a good way to avoid racking up charges without realizing it.
You apply for multiple cards at once.
You’re unsure which card you want, or you need multiple accounts. What you don’t realize is by sending out several applications at once you are committing a dangerous credit card mistake.
- When you apply for a credit card, you are signing up for a credit score report. Many people don’t realize that multiple credit inquiries in a small amount of time can have a negative affect on your credit score.
- Additionally, the lower your credit score, the worse impact multiple inquiries can have.
- Remember, low credit scores can prevent you from borrowing in the future or can prevent you from obtaining good deals with future loans.
Cash advances
Typically, if you are using a credit card to make a purchase you are already spending beyond your means. So if you can’t afford to buy whatever with cash, you probably shouldn’t be buying it in the first place. But aside from that fact, taking out cash advances is a dangerous credit card mistake for these reasons:
- The interest rates on cash advances is astronomical.
- Interest rates can climb as high at 22% for cash advance
- Not only are these interest rates very high, most companies begin to apply interest the moment you take the money.
Rule of thumb: only take out cash advances is you absolutely must.
Also, I found this article really helpful if you’re trying to pay off a Cash Advance Payday Loan!
[Read: Finding a Credit Card That’s Right for You]
Want to learn more about dangerous credit card mistakes? Check out the video below for some more tips and tricks of how to avoid these pitfalls.