Are you committing these mistakes with your credit cards?

Are you committing these mistakes with your credit cards?

This week, my good friend Nelly from My Way of Viewing is taking over the blog to post about credit card management, something I personally haven’t addressed on the blog yet nor do I think I am an expert in any way. The last few weeks have been super busy which you can read all about on my last post, 2019 New Years Resolutions and Reflections. Anywho! Let’s get straight into credit talk!

Are you committing these mistakes with your credit cards?

Nowadays, there is hardly anyone who doesn't use a credit card. But, often, we commit certain mistakes with credit cards unknowingly. Knowing about the mistakes and how to rectify them will help us manage your credit cards in a better way.

So, are you doing these mistakes with your credit card?

Not checking your monthly billing statements

If you think that checking your credit card monthly bill statements is a waste of time, you’re wrong. If you don’t check, you may miss an update in case of any change in the terms and conditions of your credit card account. Moreover, if you check statement, you’ll also come to know whether or not there’s any fraudulent activity on your credit card.Also check thoroughly the credit card transactions mentioned in the statement.

Using a debit card when you should use a credit card

It may seem to you that swiping your debit card and your credit card is all the same. But, they’re different. When you swipe a debit card, the amount gets instantly deducted from your bank. But, when you use your credit card, the amount is billed, which you repay later. Moreover, when you experience any fraudulent charges due to identity theft, you might have to pay about $500 for a debit card, whereas the charges can’t exceed $50 in case of a credit card.So, it’s always better to use a credit card because you can deny to pay the money you didn’t swipe for, and let the credit card company investigate and resolve the matter.

Not paying heed to credit utilization ratio

Credit utilization ratio comprises about 30% of your credit score. The ratio depicts how much you owe in comparison to your available credit limit. It should always be your target to keep your credit utilization ratio within 30%. However, you’re allowed to max your credit cards during an emergency. That is why credit cards are for. So, you can use your cards to tackle emergency situations. However, that should be a real emergency and not swiping your cards for a bigger amount to arrange a friends’ party at your house. You can also use your credit card if you’re getting lucrative rewards. When you earn good rewards, you can swipe your card, and repay the balance within the due date. This way, you won’t incur debt and enjoy lucrative rewards, which in turn you can use to save money. Another important point, when you've already maxed out cards, don’t wait until the end of your billing cycle; you can pay the amount whenever you can

Making only minimum payments

This is one of the big mistakes often committed by credit card users. When you make the minimum payments, you don’t default on the credit card account, but you pay more in the long run. This is because you pay more interest in the long run. Therefore, try to repay the outstanding balance on your credit cards as soon as possible. When you swipe your cards, do the calculation and make sure that you’ll be able to pay back the entire balance within that billing cycle. If you think you’re maxing out a card, you can wait a few days, if possible, to make a further purchase in your next credit card billing cycle. This way, you can make your full credit card payments comfortably. However, if you’re buying a big-ticket item, you may have to pay the amount for a few months. Then even, try to pay it off as fast as you can. Doing so, you’ll save on the interest payments.

Closing credit cards after paying back debt

When you are struggling to manage your multiple credit cards, you can opt for credit card consolidation to repay the outstanding balances in full. Doing so, your credit reports will be updated as “Paid in full”. In turn, it’ll help you to improve your credit score. However, do not make the mistake of closing your credit cards since you don't want to use them anymore. You may also think that you won’t use your credit cards to avoid being in debt. Before doing so, you should know that about 15% of your credit score depends on the length of your credit history. So, if you close your old credit card, it may shorten your credit history, which can impact your credit score negatively.

It is advisable to use your card for some purchases and paying back the entire balance at every billing cycle.

Not using the right card for the purchase

When you are using a card to take advantage of the rewards points, make sure you know what purchases are entitled to the rewards points. For example, if your credit card A offers cash back on grocery shopping and you use the card at gas stations, you’ll lose the rewards points. Therefore, knowledge about the terms and conditions of your credit cards, in detail, will help you use the right card for the right purchase. If you’re using a credit card for a long time and paying the annual fee, negotiate with your credit card issuer to waive it off. Often you need to pay an annual fee to take out a card, but when you use it for some time, the credit card company often waives it off. But, you need to talk to the company about that.

So, don't make these mistakes with your credit card. Use your credit cards properly and have a good financial life!

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