3 Costly Credit Card Mistakes You’re Probably Making

Credit cards can be a powerful tool for building your credit and paying for expenses, but only if you use them responsibly. When used incorrectly, credit cards can destroy your financial health, your credit profile and your overall quality of life. To avoid the devastating consequences of credit card irresponsibility, it is important that you are familiar with the top three credit card mistakes, as well as ways you can avoid making them.

Mistake #1: Paying Only the Monthly Minimum

Sure, by paying only the minimum amount each month, you can avoid accruing late fees and
causing damage to your credit score. However, know that credit card companies love users like you, as their real bread and butter lies in interest.

For every month outside of the 0% introductory period that you carry a balance, the credit card issuer charges you interest. The average interest rate on a credit card is 18.61%, though some cards come with APRs as high as 36%. Though the interest may seem minor on a month-to-month basis, it can quickly add up. To show you how, we’ve provided an example.

Say you carry a $1,000 balance on a card with an APR of 18.61%. You make the minimum
payment of $25 each month. If you continue to only make the minimum payment, it will take you five years to pay off the balance, and you will pay a grand total of $527 in interest.
On the other hand, if you up that payment to $100 a month, you can pay off the balance in less than a year. You will also only pay $95 in interest, saving you more than $400.

Paying more than the monthly minimum doesn’t just make good financial sense. Doing so also reduces your risk of falling into a costly debt cycle and gives you financial peace of mind.

Mistake #2: Making Late Payments

Late payments hurt you in two ways: 1) They cost you in late fees and interest, and 2) they hurt your credit score. If you fall more than 30 days behind, your credit score may fall by between 17 and 83 points. The accrued fees can also make it difficult for you to catch up. If you have trouble remembering your due dates, set up automatic payments of the minimum monthly amount. This, at the very least, can keep you from missing payments.

Mistake #3: Not Familiarizing Yourself With Credit Card Benefits or Rewards

Most credit cards offer one or several types of benefits and rewards to users. For instance,
Discover it® Student Cash Back grants a $20 statement credit to student users who earn a 3.0 GPA each semester. Chase Freedom Unlimited® offers a $200 bonus for users who charge $500 in purchases within the first three months of opening an account.

If you make $4,000 in purchases within the first four months of opening a Chase Sapphire Preferred® Card account, you can get 60,000 reward points, which is equivalent to $750 toward travel. By familiarizing yourself with all possible rewards and benefits, you can make the most out of your credit cards and save in several areas of your life.

It takes most people years, if not an entire lifetime, to learn the ins and outs of responsible credit card usage. You can get ahead of the game by familiarizing yourself with common credit card mistakes and steps to avoid them today.

Pat - September 15, 2020

I find your articles very helpful and informative.
With regard to the wise use of credit cards such as Visa …. do the figures you outlined also carry the same student benefits say from Visa in Ireland.
The reason I ask is you referred to Dollars in your article.
All the best,

Martina Young - September 15, 2020

I have not gotten any points for my on line purchases. Is this new?

Louise - September 15, 2020

Very good advise.I have used credit cards for the past 55 years.I have never paid 1cents interest.When used correctly,credit cards are the best thing going.

AdrienneChaney - September 16, 2020

Very good information and easily understood. I need to hear these things.Thank you for putting it out there.

Herman L. Cook - September 16, 2020

Very helpful information. THANKS.

Angela McConnell - September 16, 2020

Great article. One other important PLUS for using your credit card for big purchases: A few years ago, I needed to replace my tired and dated “3-piece-suite” for something a bit more modern and easy on the eye. So I picked out a beautiful tan leather 3-seater + 2-seater sofas and also a large mirror. The total cost was circa €3,000. I needed to pay half up-front, (€1,500) and then there were 6 weeks delivery time.

About three weeks later the furniture company went bust. Long story short, as I had paid the €1,500 deposit with my credit card, and there is a form of insurance built into the credit card transaction, I was refunded the total amount by my credit card company. As I discovered at the subsequent Creditors Meeting, those who had paid by cash, got nothing back. The liquidators called me about 6 months later to see if I wanted my sofas + mirror, and I could have them if I paid the outstanding balance. At this stage, I have found alternative sofas elsewhere, but I ended up getting the mirror free. Always purchase expensive goods with your credit card.

Roy - September 16, 2020

You can also get in trouble if you just pay what is owing for you monthly period
You will find that you really should pay the amount for the first of the month.rather than your pay period.
As an example your biling period may be the 12th the 12 Th owing $800 .when you check what’s owing the first of the month is $1400. THIS IS AN EXAMPLE HOW ALL OF A SUDDEN YOU HAVE A BILL YOU CANNOT PAY.

Jeannie Klein - September 16, 2020

Wish there was a very low interest rate. I’m having a very hard time

Samiha - November 2, 2020

Thank you for your advice. Usually I am cautious using my credit card.

Thomas - November 24, 2020

Need Help increasing your maybe we can we.

Gordon E. Sokolik - December 14, 2020

We use our cards a lot in all stores. when we finish shopping we come home and my wife pays the card off on telephone banking so we do not pay any interest.

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