Credit cards are a convenient way to purchase goods and services. Unfortunately, they’re also one of the most expensive ways to borrow money. Here are 10 credit card mistakes that can cost you big bucks.
The credit mistakes to avoid is a blog post that provides 10 credit card mistakes to avoid at all costs.
This is a sponsored post for Jasper Card. All of our views are our own.
Credit cards are useful instruments that may provide you with a slew of financial advantages. If you make a few errors, though, those advantages may soon vanish, replaced by needless interest payments, worse credit ratings, and fines.
The most informed customers are aware of what they can and cannot do with their credit cards in order to maximize advantages while avoiding liabilities.
Avoid These 10 Credit Card Mistakes
The majority of the errors on this list are simple to correct. They’re reasonable mistakes that many of us might make if we were low on funds one month or overburdened with everyday responsibilities.
However, a handful of them are difficult and easy to miss. Even the finest among us are prone to making these typical blunders. So keep reading to discover about the 10 credit card blunders you may be doing right now and how to avoid them.
1. Payments that are late
For many credit card users, late payments are a regular occurrence. And that’s a shame, since a string of late payments may severely hurt your credit score. While your credit card company may pardon a single late payment every couple of years, the majority of late payments will be reported to the credit bureaus.
Setting up an automated payment to your credit card each month is one of the greatest methods to avoid this. To make this happen, some cards include applications or online alternatives. The WebBank, Member FDIC, Jasper Card, for example, offers an Autopay function that allows you to automate your monthly payments. This way, even if you’re swamped with invoices and other monthly chores, you won’t miss an essential payment.
2. Paying the Bare Minimum
Making just the bare minimum payment is a certain way to remain in debt. Because most credit card minimum payments are a fraction of a normal amount, this is the case.
While we understand that some people’s financial circumstances prevent them from doing so, if you’re able, pay down as much of your amount as you can every month. Carrying a debt on your credit card may cost you a lot of money in interest charges.
If your “credit utilization rate” (the proportion of your revolving balances that you’re presently utilizing) is more than 30%, running a debt may hurt your credit score.
3. Making the Wrong Card Selection
Choosing a credit card that is out of sync with your financial habits and personal situations can make it more difficult for you to reap the advantages of owning a credit card. If you have a habit of carrying a balance at the end of each month, having a high-interest card may be detrimental.
We like cards that provide basic and obvious advantages such as cashback. This is due to the fact that it is a benefit that everyone may take advantage of. It’s essentially the same as receiving a discount on anything you purchase.
4. Maintaining a Healthy Balance
As previously said, we are not supporters of carrying a credit card debt from month to month. The interest rates are high, and the amount may have an effect on your credit score due to the credit usage rate stated before.
But what if those balances continue to sneak up on you? The first step is to cut down on your expenses. If you’re spending more than you can afford to pay off each month, do all you can to cut down on your spending to the bare minimum.
Second, choose a card that allows you to set up recurring payments to maintain your balance at zero at the end of each month. We previously stated that one of our favorite cards (the Jasper Card) includes an Autopay function that may help you keep your balance low. Jasper’s autopay function even allows you to set up recurring payments depending on your credit usage rate, which is a first in the market and may be very beneficial if your aim is to develop credit quickly.
5. Excessive use of credit cards
You’ll see that many of the top 10 credit card errors are interconnected. Overspending on credit cards has previously been addressed, and it is the scourge of every credit card holder’s financial health.
Even if you know you don’t have the cash to pay for it right now, it’s all too simple to simply “put something on the card.” But keep in mind that everything you purchase with that piece of plastic will have to be paid for at some point. And why do you believe you’ll have the money later if you don’t have it now?
Maintain a level of spending that allows you to pay off your credit card in full each month. Your bank account will be grateful.
6. Not understanding the terms of your credit card
The Terms of Service (ToS) on every credit card govern your usage of the card as well as your legal relationship with the card issuer. You should be familiar with these words, particularly a few important acronyms and phrases:
- The money you pay each year to the card issuer simply to have the card is known as the annual fee.
- The APR stands for Annual Percentage Rate. This is the yearly interest rate on your credit card. Balance transfers, cash advances, and purchases all have varying APRs on most cards.
- Fees for certain transactions, such as cash advances or balance transfers, are charged by some cards.
- Late payments, for example, may result in penalties on certain cards. These may be substantial, and occasionally include a change in your APR, so keep an eye out for them.
You should get a contract with all of these conditions when you obtain your credit card (and many more). We understand that they may be long, but please read them at least once.
7. Exercising Your Card Limit
For a number of reasons, maxing out your card is a bad idea. To begin with, you’re unlikely to be able to pay it off in a single month (unless your limit is very low or your income is very high).
Your credit usage ratio will also be very high (100 percent , actually). Your credit score will suffer as a result of this.
Third, depending on the terms and conditions of your contract with the card issuer, going over your card limit may result in a penalty.
Finally, you will no longer be able to utilize your card’s advantages. After all, you can’t use your card to make purchases if you’ve already over your credit limit.
If you’re constantly maxing out your credit card, it’s time to either cut down on your spending or raise your credit limit (depending on your circumstances).
Failure to Review Monthly Statements
Many individuals overlook their monthly credit card bills, which is a mistake for many reasons.
Your monthly credit card statements are very useful recaps of your expenditures. Examining them will show trends in your own spending habits that you should consider changing. Furthermore, any fraudulent transactions will only be discovered if you check your statements on a frequent basis. Finally, if you examine your statements, you may find unused membership payments for services you’d be better off deleting.
A fast tip: Some credit card issuers may give you a modest discount if you choose to get your monthly statement online rather than via mail. Not only is this beneficial for the environment, but it also sends a little amount of money back into your pocket.
9. Using Your Credit Card as a Source of Income
Some individuals use their credit cards as a source of additional money. It’s not the case. Borrowing, not spending, is what using a credit card entails. This difference is particularly significant for individuals who find it difficult to resist the allure of a high credit limit, since it is extremely simple to rapidly accumulate an unsustainable amount of credit card debt.
10. Giving Up Your Credit Card Benefits
One of the primary advantages of having a credit card is the rewards program. So make advantage of them! To get the most out of your card, the best cards make it simple to utilize all of your benefits on a daily basis.
This is why, as previously said, we like cashback. It’s as though you’re receiving a discount on everything.
The Jasper Card, which we previously discussed, provides cashback on almost everything you purchase (whereas some cards only offer it on certain categories of spending, like groceries or gas). Jasper also has one of the industry’s best cash back rates. There are, of course, conditions. After you click, you’ll be able to learn all there is to know about them.
There is one exception to our reward suggestion. Spending money just to enhance your rewards is never a good idea. Almost seldom will it be worthwhile. To put it another way, it’s preferable to be thrifty and save money rather than spend recklessly in order to get rewards points and cashback.
Credit cards are among the most useful financial innovations of the past century. They provide almost limitless flexibility, ease, and fast access to money that other kinds of borrowing just cannot match.
However, their broad usage opens the door to a lot of misuse. Following the guidelines outlined above, you should be able to avoid making many of the most frequent credit card errors.
Once you’ve figured out how to avoid these traps, all you have to do now is reap the benefits of correctly utilizing these apparently miraculous tiny bits of plastic.
Credit card companies are known for their strict policies. If you ever find yourself in a situation where your credit card is declined, it’s likely that you made one of the following 10 mistakes. Reference: do credit card companies make mistakes.
Frequently Asked Questions
What are 5 common mistakes that people make with credit?
The most common mistakes with credit are not paying off your credit card in full each month, spending more than you can afford to pay back, and not making a budget.
Which credit mistakes are the most serious?
Credit mistakes are the most serious when they affect the persons ability to obtain credit. For example, if a student is unable to receive credit because their grades were incorrect on their transcript, this would be considered a serious error.
What are a few ways to avoid credit card fees?
There are many ways to avoid credit card fees. One way is to use a prepaid debit card. Another way would be to use a bank account, which is not subject to any fees.
- avoid using credit cards
- list six ways to avoid unnecessary credit costs
- can i put extra money on my credit card
- what type of credit card should you shop for?
- paying credit card twice a month