You’ve probably heard a lot of horror stories of people who got themselves into serious trouble, possibly even bankruptcy, by abusing their credit cards. Truth is, most people fall into one or another of the traps set by credit cards at least a few times; they’re nearly impossible to avoid. However, learning to stay clear of these bad habits will definitely have a positive impact on your financial situation.
1. Not staying updated on the contract changes.
Of course, everybody tells you to read the fine print before entering into a contract. Sometimes you get excited about the special introductory offers, and you fail to take into account the downsides. But the most common issue is that people read the initial contract carefully, but fail to catch up every time the bank sends an update. Remember that the lender can change the terms with just a short notification, so make sure you read that notification when it arrives in the mail.
2. Taking up on all the offers.
Just because you qualify for another credit card, it doesn’t mean that you should accept it. Remember the words of Groucho Marx: if they want you as a client, you probably don’t want to become their client. Be selective, and actively hunt for the best offers, don’t wait for them to land on your doorstep.
3. Paying with a card when you could pay in cash.
It’s true that a card is easier to use and sometimes you may even forget cash still exist, but you shouldn’t charge every little expense, such as a coffee cup in the morning or small purchases at the flea market. These things add up quickly, and it’s impossible to keep track of all of them if you don’t see exactly how much you spent.
4. Using your cards for transactions that are not secure.
Theft is a very real threat for your credit card details, using it indiscriminately, for online or offline translations, may have dire consequences.
5. Repaying just the minimum amount.
The minimum is just that – the bare amount the bank needs in order to make sure that you can still cope with the debt, but it allows your debt to gather interest rate for a very long period of time. Even if you can’t cover the full balance every month – which would be the ideal case – at least make an effort to pay more than the minimum.
6. Making the cards pay for your mistakes.
Many people, when they realize they are in financial trouble because they’ve abused their credit cards, start to close them as quickly as possible. Bear in mind that this will damage your credit score; ideally, you should learn to use them correctly, and resist the temptations, even if you still have the cards to pay for everything.
7. Using one card to pay off another.
This is just moving debt from one account to another. It may be a good solution once, to cover for an emergency or to move the loan to a card that has a better interest rate, but, if it becomes a habit and you’re constantly using one card to cover for another, then you’re on a certain path to bankruptcy.
Leona is a guest post contributor. She loves to write on financial issues like debt, credit card, mortgage, bad credit loans, insurance etc. She loves to define financial strategies to recover from critical financial situations.
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Category: Money Basics