There’s no doubt that credit cards come in handy when you’re in need of money you don’t have at the moment, but be care of costly credit card mistakes. Whether it’s getting you out of a jam or allowing you to make a payment before money actually comes in, credit cards can serve as a miracle. It should come as no surprise that while credit cards make it easy to spend, they make it very easy to overspend.
There’s a price placed on that money you’re borrowing. Between interest and fees, credit cards certainly come with some strings attached. A blessing and a curse, credit cards can help or hurt your financial situation. The CGS Team is sharing 5 costly credit card mistakes to avoid at all costs. If not, you could wind up spending much more than you want or need to.
Costly Credit Card Mistake #1: Taking Cash Advances
There’s a difference between using up your available credit for purchases and actually taking a cash advance to pay for things. Think of a cash advance as an expensive, short-term loan. Not only do you get hit with a steep fee when pulling cash from a credit card at an ATM, but you are also hit with a cash-advance fee from your lender.
The most important reason to shy away from this mistake is the fact that the interest rate goes sky-high for cash that’s taken against your card. If you think you are paying high interest on your regular purchases, wait until you see what you’ll be paying on a cash advance.
Costly Credit Card Mistake #2: Paying Your Credit Card Late
You are doing your future self (and your credit profile) a huge disservice when you pay your credit card bills late. If you’re just one day late, you’re hit with a very pricey late fee. If you’re over 30 days late, you’re being reported as late on your credit report.
According to Money Talk News, your credit score can fall as much as 100 points by being reported late just once. The higher your credit score is, the more of an impact being late will have. Check out the Small Habits Big Returns article for some tips to help you stay on top of your finances.
Costly Credit Card Mistake #3: Failing to Read the Fine Print
In Confessions of a Credit Junkie author Beverly Harzog shared with readers how failing to read the fine print on her credit card statements cost her thousands of dollars in debt, fees and interest.
When you apply for a credit card, you are agreeing to take full responsibility for any legitimate charge, as well as any fee associated with such charges. You are also agreeing to their pay schedule. Be sure to read and understand your grace period. Thinking you can carry a balance for a month without interest may work for one card, but not the next.
Costly Credit Card Mistake #4: Going Over Your Credit Limit
It’s never a good idea to exceed your credit card’s limit. Number one, if you are using a credit card, you are likely spending money you don’t have.
When you exceed your credit limit, you are still spending money you don’t have, but now you’re spending more than you are even allowed to spend. Going over your limit can result in automatic declines (hello, embarrassing), hefty over-the-limit fees, and a negative hit on your credit score.
Costly Credit Card Mistake #5: Abruptly Closing Credit Accounts
Whether you are carrying a balance or not, when you close your credit card accounts, you are cutting down your credit utilization ratio. You are also affecting your length of credit history. Both of these factors make up your credit score.
Hits on one or both of these areas can lower your score and ultimately cause you to pay more in interest on future cards, loans, and other debts. If you find a card no longer useful, or you want to avoid spending, cut the card up. You certainly can’t spend on a cut card, and you are protecting your credit utilization and length of credit history at the same time.
Most of us don’t learn how to properly use credit cards until we’ve had to shell out a lot of money. Don’t let that stop you from moving forward with a solid knowledge-base about credit. Avoid the mistakes listed above, and you can certainly turn things around! What costly credit card mistakes have you made in the past? What advice would you give you to past-self using her first credit card? We definitely want to get this discussion going, so leave a comment below to share!