How Will Your Credit Card Mistakes Affect You?
Let's be honest, we have all made at least one mistake when it comes to using our credit cards. Whether it was something we realized in the moment or not until the bill arrived, no one is perfect. Have you ever stopped to think about the way you use your credit cards? There might be a few mistakes you don't even realize you are making. The trick is trying to recognize the error beforehand (if possible) and weigh out the possibility of how much harm it can do to your credit.
Aside from getting credit cards to help build up your actual credit, most people like to have one or two cards available "in case of emergency." There are many unforeseen events in our lives that can range from automobile repairs to a spouse losing their job. In any event, sometimes you might just need that range of credit to help you in a situation you hadn't financially prepared for. Carrying a balance on your card for a few months until you get adjusted is ok, but if possible try and use one with no annual or a very low annual fee.
What about those credit cards offering rewards? It seems as though many companies are giving you something in return these days, whether it is cash back, concert tickets or the standard airline miles. If you are in a situation where you can charge on these cards and then pay the balance in full then this is not harmful to your credit. The trick is being careful with these "rewards" and understanding how much spending is necessary to attain them. Also keep an eye on the interest rates and try to pay the balance down as soon as you can.
Have you ever looked at your "minimum amount due" and breathed a sigh of relief? Thinking to yourself that amount is pretty small and manageable. If you answered "yes" then the credit companies love you! They want nothing more than to have you send in the bare minimum every month (or not at all). The longer you stay in debt the more interest they make off of you. This is a common mistake but one that is workable. Try to pay more than your minimum amount, even if it is only ten or twenty dollars over. You will be happy that you saved yourself extra interest payments in the end.
Some companies make a pretty good play for people by offering a balance transfer with low interest. It sounds like a good idea, right? Did you realize that you are still having to apply for a new card and that will affect your credit score. This might work if you have found a card to transfer a really high balance over to, but if you do this a few times you will definitely hurt your credit. Pay attention to the fees and the terms of service, sometimes you might end up back at your original (or close to) interest rate. Don't make the mistake of multiple transfers; keep it to a minimum if you have to transfer at all.
Here is one mistake that is sometimes realized once it's too late. Some stores and companies offer you an immediate discount if you apply for a card while making a purchase. That 10 or 20 percent actually can come in handy, but if you are getting a card just about everywhere you are making the mistake of having too many credit cards. Make sure the value is worthy of your application and the interest rates are not too high. It seems like a good idea but most department stores and clothing stores carry higher interest rates on their cards so that 10 percent you are saving off the first purchase won't matter once you start paying it down with a high APR.
If you take cash advances out on your card just be prepared for the high fee that comes along with it. There is no grace period and the high interest starts adding up immediately. As tempting it might be, you need to avoid this mistake and remind yourself it is not an ATM card. If you find yourself at this point it might be a good time to take a look at your finances and figure out what kind of a problem there is. A cash advance from a credit card is never a good idea; you will just end up paying a lot more money for the transaction itself.
Let's take a look at some bigger mistakes you can make with your credit cards. If you max out a card you are going to really hurt your credit score. Did you know that 30 percent of that score is taken from how you utilize the card? There is a ratio that is taken into account, your limit and your balance. If you are taking a credit limit to the max and not being able to pay it down it shows that you are having some type of problem. Whether it is your income or just poor money management the credit bureaus don't care about your reason.
Some people have been really responsible with their credit and paying it on time, even if only the minimum amount due. Then there are others who for whatever reason make their payment late. This is a mistake that can be avoided usually but one that can result in late fees and even a report to the credit bureau. If you make this mistake once you can call your company and talk with them. There is a possibility that they will waive the fee for you if you are in good standing. If this is becoming standard, you are making a big mistake with your credit. Once your credit report starts showing late payments that will stay with you for years and will affect any application you fill out down the line.
Making a payment late is going to hurt you, but missing one altogether is a very big mistake. There are instant and long-term consequences. Just like when you make a payment late you will be hit with a late fee but when you miss one you will risk having your interest rate rise. Almost a third of your credit score is factored from how responsible you are when it comes time to pay your bills. Missing a payment will hurt you not only on your next statement but down the road as well. Always keep in mind your financial future and those important loans you have yet to apply for.
Maybe you have made one or even several of these mistakes that have hurt your credit. It's not too late to get back on track. You can start today working to correct those mistakes. If you feel as though you are just too far into debt with your cards and maybe making your payments isn't possible, you do have another option. Debt Settlement companies can work with your creditors to settle what balances you do owe and get them paid in full. They typically will be able to settle for 40 to 60 percent of what you owe them. It is important to find a reputable debt settlement company that can get you back in good standing with your finances.
Before you know it, you will be on your way to fix any mistakes you might have made with your credit and avoiding making any in the future.
