Credit cards are tricky little things. They can have a big impact on your credit score if you don’t use them carefully. Learn from the mistakes of others and save yourself time, money and hassle by avoiding these common credit card mishaps.
1. Too many
You don't need to accept every pre-approved offer that lands in your mailbox. In fact, it's best if you don't. Having too many credit cards, even if you keep up on payments and don't carry a balance, can worry a lender.
2. Choosing the wrong card
Picking a card because of the seemingly amazing rewards or points programs can lead you to picking a card with a higher interest rate or tricky terms. Credit card companies are out to make money, not to make consumer's dreams come true. Be wary of offers that seem too good to be true. Weigh rewards programs against interest rates and other charges to determine the best card for your needs.
3. Introductory rate confusion
Many cards offer a 0% introductory rate, which usually expires in 6 months to a year. After that, the rate can jump upwards of 20%. Know the terms of this low introductory rate to avoid a surprise when the promotional period ends.
4. Not looking for the best rate
You wouldn't buy the first flat screen television you saw while out shopping, so don't settle for the first card you look at. It's best to shop around, even when looking for a credit card. If you receive a pre-approved credit card offer in the mail, compare its terms to other cards you may be eligible for. Chances are the offers that come unsolicited won't have the lowest rates.
5. Not reading the fine print
Ah, yes. The fine print. What does reading the fine print actually mean when it comes to credit cards? This small text at the bottom of an offer will usually contain information about the introductory rate expiration, balance transfer fees, cash advances, penalties and many other terms. Dig in and understand all the terms and conditions before signing on the dotted line.
6. Making minimum payments
Howard S. Dvorkin, founder and president of Consolidated Credit Counseling Services, told CreditCards.com, "Credit cards are not a form of supplemental income. They're for convenience, and should be paid off at the end of every month." This is the best mindset to have when using a credit card. If you don't have the money to pay off the entire balance on your card at the end of the month, then don't spend that much money. Paying the minimum will cost you more in the long run.
This calculator from CreditCards.com can help you figure out how long it will take to pay off a bill while making minimum payments.
7. Paying late
Paying late will cost you more money and negatively impact your credit score. If you consistently forget to pay your bill, I suggest setting a reminder on your phone or computer for a few days before it's due. Automatic payments from your checking account are also a good idea, but make sure they're scheduled to make it to the credit card company in time.
8. Ignoring monthly statement
Your monthly statement is sent to you for your own benefit. Read it and keep an eye out for mistakes or charges you don't understand. Reading your statement is the easiest way to catch any identity theft or use of your card by someone else.
9. Maxing out
Going over your credit limit looks bad on your report. Keep track of your spending and know when you get close. Switch to cash or other forms of payment to avoid maxing out.
10. Buying things you don’t need
This is a mistake anyone can make but it seems to be an issue when shopping with a credit card. Credit cards sometime feel like "free money" because you tell yourself you don't have to think about it until the end of the month. This can lead to unnecessary spending which racks up your balance.
Don't treat your credit card like free money. Try to view your credit card as a tool to build credit and provide a convenient way to pay. When used properly by avoiding these mistakes, you'll safe yourself time and money.
For more credit card information and more on these mistakes, visit CreditCards.com.