Bad Credit Card Habits To Avoid
If you’re a sensible car holder who pays off their balance every month and only spends what they can afford – well done! The vast majority of card owners are sensible types who make sure that they don’t have any problems.
However, for others, it’s easy to fall into bad habits that end up costing money. The temptation is to think of your credit limit as “free money”, and once you’ve fallen into that trap, you will find your card will be more expensive that your realised. Here’s why.
Many cards offer what – on the face of it – appear to be great ways of handling your money and getting out of debt. However, if you don’t study the terms and conditions carefully, you may find yourself falling foul of extra charges and higher interest rates.
So, when applying for a card:
1. Check out the fine print
2. Shop around for the best rates
3. See what happens when the introductory rate expires – sometimes the new rate may be higher than you can sensibly afford
4. Be wary of balance transfers. Credit card companies want your debt because they can charge interest on top of it. In the long term, they’ll make back more than they lay out
Once you’ve got your card, it should be used like you would money in your pocket. Only spend what you can afford each month, and once that money’s gone, it’s gone/. If you start spending more than you can afford each month, your balance increases, as do your repayments.
When using your card:
1. Use cash if you’ve got it to hand. That way you won’t spend more than you can afford. Also, be careful about putting daily expenses on credit. The temptation is to forget that you’re doing this, leading to a shock at the end of the month
2. Avoid cash advances. These are expensive, and unlike purchases, interest is calculated from the moment you get the money, and it’s probably at a higher rate, too.
3. Don’t buy stuff just to build up your reward points
And when you get your statement:
1. Make sure you check it carefully. Bad card users will just look at the bottom line and ignore the rest. If you see your card habits in black and white, it will teach you to use it more sensibly
2. Pay your bill monthly, on time, and in full – we can’t say this often enough. Credit cards are great, as long as you use them maturely, which leads to…
3. Don’t pay the minimum each month – that’s a sure-fire way of keeping the banks happy.
The number one sin of credit card ownership is exceeding your credit limit. We’re always preaching that cards are there to help you manage your everyday life, but as long as you keep your balance within limits. If you have problems, don’t bottle it up – speak to your card issuer, who will lend a sympathetic ear.
Contrary to what you hear, banks aren’t staffed with ogres – they want your business, and they love it when you keep your financial affairs in order and keep a tidy credit card. If you avoid a few bad money habits, they’ll love you even more, just as you’ll love your low, low credit card bill!
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