Regardless if you have a regular credit card or a bad credit credit card, there are common mistakes you should avoid by all means. Otherwise, you may end up paying heftier fees than normal. And worse, your credit rating can go from fair to poor and really bad. If you don’t want that to happen, here are some common mistakes to steer clear from:
Paying only the minimum payment
One of the most common and unfortunately detrimental mistakes many consumers continue to commit is paying only the suggested minimum payment. The problem with this practice is not just about lengthening the amount of time you pay for the balance but you are actually increasing the amount of interest you incur over time. Rather than pay the minimum, you’ll always be better off increasing your monthly credit card payments.
Paying beyond your due date
Late payments are another habit you should avoid by all means. Just like minimum payments, this practice can lead to major financial consequences. One of which is the infamous increasing interest rates and hidden fees associated with late payments. Remember that even a day or two of being late on your payments is considered as a 30-day late payment by most banks. Avoid this disastrous mistake by scheduling your payments a few days before your due date.
Using card as substitute for cash
Considering the convenience your card offers, it’s very tempting to just keep swiping as if it’s cash you have. Well, that’s one mistake you’re going to pay a lot for in the end. When you substitute your card for cash and use it for purchases like gas, food and other essentials, you are putting yourself in a very difficult financial spot. Most often than not, you will find yourself paying for the bills long after you’ve consumed the goods. The solution, stick with cash when it comes to your essential purchases.
Taking a cash advance
Your still a few days from receiving your paycheck and you don’t have any cash available anymore. Since the credit card is handy, you’ve decided to take a cash advance and that’s another major credit card blunder you just committed. And it will cost you dearly too. In most cases, you’ll probably end up paying more in interest than your normal credit card charges. Plus there’s also the transaction fee on top of the interest rate. Read the fine print so you know the terms with regards to cash advance, interest rates, hidden fees and more.
Maxing out your credit card
Your bank has increased your credit limit but that doesn’t mean you should use them all up. It’s tempting to do so, yes, but like other credit card blunders, this habit can cost you dearly. In fact, charging your card beyond the recommended 30% of your credit limit can hurt your credit score. A maxed out credit card also means it will be harder for you to pay the balance in full each month. And when you carry a high credit card balance, it usually means higher incurred interest.
Closing your credit card account
You’ve paid your card in full and now you want to close the account. Don’t do that just yet especially if you have bad credit. When you close your credit card account, you are essentially reducing your available credit line and that may have a huge impact on your credit score. Keep it open and use it regularly but this time, stay within the 30% credit limit suggestion and pay all your bills on time.