Your credit card can be a vital money tool when it comes to your finances, if you use them properly that is. If you are responsible with your credit card and don’t go bonkers with it, you can benefit from having one. They can help to build your credit rating and you can even receive valuable prizes with your credit card. However, if you abuse your credit card, you will end up developing a high pile of credit card debt.
Card credit debt can be a pain in the backside to get out of, especially if you are constantly using your credit card for everyday purchases. A lot of people form bad habits when using their credit card, which ultimately results in that person ending up in debt. If you avoid these common mistakes, you will be shocked at how much better your financial situation will get as you grow older.
If you make a late payment, it can devastatingly affect your credit rating. Just one late instalment can send your credit rating plummeting by 100 points. Your late instalment will most likely stay on your credit report for many years.
Luckily, if you haven’t passed the 30 days overdue mark, your late payment towards your credit card won’t be recorded as legitimately late. Be that as it may, your card provider will most likely charge you fee for your late payment. If you are only a few weeks late with your payment, we would advise that you make that payment as soon as possible.
MISSING PAYMENTS ENTIRELY
Your credit card payments may become so unbearable to the point that you choose to quit paying altogether. This is the worst thing you could do. If you miss your payments towards your credit card altogether for at least half the year, your card provider might feel inclined to issue a charge-off, at which the lender writes your account off as a loss. This means that you will not be able to use your card for future purchases.
Having your account charged-off show up on your credit report for years to come, and in turn can cause your credit rating to deteriorate. If you find it hard to keep up with your credit card payments, don’t resort to missing the payments entirely. You can give your card provider a call and they may be able to help you find a solution to pay on time.
MAKING ONLY MINIMUM PAYMENTS
If you find that you are only making the minimum payment towards your credit card every month, that might be an indication that you need to stop using credit cards altogether or at least freeze them until you have made all of your payments. By only paying the minimum balance, you will most likely have to pay more interest in the long run. Although making the minimum payment every month means that you only have to pay a small amount and save money, you are actually just increasing your payment period.
Sit back and ask yourself: “Would I rather pay the minimum and wait years to pay off the balance, or, would I rather pay in full every month and clear my balance sooner?”
We would advise that you pay in full or even just a little more than the minimum, so you can pay off your debt sooner rather than later.
CLOSING YOUR ACCOUNT
While it might feel great to close your record and put the card in the shredder, doing as such could negatively affect your credit rating. Even if it is a card you don’t particularly use, closing that card isn’t necessarily the answer. Closing your credit card account can have negatively affect your credit history as you are decreasing the amount of credit available to you. This can result in increasing your credit ratio which in turn can hurt your credit rating. Consider keeping the account open and using the card every so often instead of closing the account entirely. The only time you should consider closing your account is if you are facing an annual fee that can potentially be hurting your budget.
TAKING OUT CASH ADVANCES
If you make cash withdrawals from your credit card, then stop! Although you think that you can just pay the money back when the next credit card payments rolls around, the interest rates can be 10% higher on cash advances. Plus, the payment usually takes place before the next bill is due. Always stick to debit card purchases and avoid taking out cash advancements.
SPENDING JUST TO GET REWARDS
If you are using your credit card for random purchases just to earn rewards, then stop right there. Although the rewards are good, the unnecessary spending could be costing you a hefty penny. Making everyday purchases with your credit card just to get free stuff won’t do your bank account any good and may even cause you to fall into a debt hole. Plus, if you constantly use your credit card while having a high balance, you will most likely lose your rewards due to interest fees.
IGNORING YOUR CREDIT CARD STATEMENTS
Since majority of people nowadays pay their credit card bills online, it’s more likely that they will disregard their statements that come with the payments. This can be a very pricey mistake. Instead of ignoring your credit card statements, take some time to read them. By not checking your statements, you will never know if someone may be making purchases with your account. If you do find transactions on your statement that look suspicious, call your card provider immediately.
When it comes to credit cards, make sure you educate yourself before applying for one. Knowing the risks and responsibilities of owning a credit card will help you avoid falling into the debt trap. Remember, always keep your balances low and never apply for a credit card unless you absolutely need it.
WHAT YOU CAN DO!
If you struggle to keep up with your credit card payments, then get in touch with Basik Money today on 0330 041 2299 to get free impartial advice from one of our debt advisors.