Credit cards can be useful tools but you need to make sure you’re using them right to avoid falling into unnecessary and costly debt. What might feel like the perfect spend at the time could ruin your financial wellbeing and credit history, especially if you don’t commit to controlling how and when you use your credit card.
Use your credit card wisely and manage it well - here are five credit card mistakes to avoid:
1. Thinking of your credit card amount as free money
This skew in perception is a big stumbling block for many new credit card users. It’s important to remind yourself that your credit card isn’t free cash – it’s a loan that needs to be repaid, often at a hefty interest rate.
2. Paying only the minimum repayment amount
The longer you stay in debt on your credit card, the more it will cost you. Not only does it increase the amount of time it will take you to pay off your card, the high interest fees will increase the amount as well. Be wise – either pay off the full amount every month or make sure that your payments are sizeable, regular, and make a real impact on the amount you owe overall. This approach will save you time and money.
3. Paying late or not paying every month
Once you let a due date pass you by, the interest rate on your credit card will skyrocket and, depending on the card, you might face penalties for late or non-payment. Rather, get paying as soon as possible – it’s worth it in the long run. Make the payment a direct debit from your personal account or make a note to pay every month at the same time and on time.
4. Maxing out your credit card
Using the full available amount on your credit card can sink you into more debt than you can handle. It means higher fees and repayments, and no access to credit card funds should you need them for an emergency. As the maximum amount tends to be large, this also means it will be harder (and take longer) to pay back. Rather maintain a healthy credit balance or make sure that any debt you do generate with your credit card is manageable.
5. Deleting your credit card statements
It’s important to check your statement every month – this will help you keep track of your expenses and fees, as well as ensure that there is no fraudulent activity on your account. Your statement also often contains important information about changes to your terms and conditions or rules of use. Always read your statement to make sure your expenses are valid, you always know what you owe, and you are up to speed with the latest relevant information.
Financial tools like credit cards should work for you, not enslave you. They need to be part of a structured financial plan that considers your responsibilities and dreams.
Need help managing your wealth?