Thursday, October 11, 2012

Don't Make These 7 Credit Card Mistakes

While credit cards get a bad reputation on the Internet, they actually can do you a lot of good if you know how to use them properly. Since there’s a rather good chance that you have some sort of credit card in your wallet, you will want to make sure that you avoid these seven mistakes that can cost you a lot in the long haul:

#1 Paying Bills Late
One of the biggest problems you can encounter when paying your bills off can include paying your bills off late. Aside from the late fees that credit card companies charge you, these companies can also jack up your interest rate and let’s not forget that it’s going to hurt your credit score. For example, let’s take one of Chase’s popular cards, the Sapphire Card. In the fine print, it notes that if you miss one late payment, your interest rate can go from a low 9.99% to a whopping 29.99%! Experts note that late fees are often 40% of your FICO score.

#2 Transferring Balances
Transferring your debt from one card to another may sound like a good idea but what you have to understand is that most, if not all credit card companies are going to charge a transfer fee. Generally, this fee is going to be around 3% to 5%. So if you’re going to transfer your $5,000 balance, plan on pending at least $150 in fees. The key here is to make sure that you understand your balance transfer rules and always make sure that you do your math to see if it makes financial sense.

#3 Minimum Payments Kill You
As a rule of thumb that you have heard – if you can’t afford to pay your card off in full at the end of the month, don’t use your card! Well sadly, some people just don’t follow that tip. If you’re finding that your credit card balance is getting out of control, you may be making the minimum payments. Yes, while this is better than paying nothing, you have to realize that by doing so, your credit card balance is going to linger for a long time. For example, let’s say that you have a balance of $5,000 with an interest rate around 14%. If you just paid $100 a month, it would take you over 20 years to pay it off! So the next time you consider paying the minimum, consider throwing a few more dollars toward it.

#4 Not Looking at Statements
Believe it or not but many people just throw their statements away after they pay. What many don’t realize is that mistakes can happen on the statement. Things such as unnecessary fees, fraud and jacked up interest rates can kill you in the long run. Always make it a habit to check your statement to make sure that everything makes sense because you never know what may be on it.

#5 Taking Cash Advances
Yes, there are going to be times when you need cash now. While it may be tempting to plop your credit card in the ATM, you have to realize that cash advance fees can really come around to haunt you. On average, some credit card companies can tack on a minimum advance fee and a high interest rate. For example, a popular Citibank card will take on a $50 fee and 25% APR if you take out $1,000! As you can see, that can add up fairly fast. The longer you take to pay it back, the quicker the interest is going to hit you.

#6 Using Rewards the Wrong Way
Yes, many credit cards on the market do offer some great rewards, but sadly, some people don’t know how to use them properly. What you have to realize is that if you’re not paying your card off in full each month, you’re not taking advantage of rewards, and let me explain why. See, the interest you’re going to have to pay will usually outweigh your rewards nine times out of 10. In general, when using your rewards, just make sure you’re using them the right way.

#7 The Annual Fees
As our last tip, the last thing that you’re going to want to look at is the annual fees. While there are fantastic cards out there that have annual fees, you have to ask yourself if it’s worth it. For instance, let’s say that you spend $100 on the card for the year but it has an annual fee of $75. Is that worth it to you? It’s probably not! So with that being said, make sure that the rewards far outweigh the annual fee if you’re paying one.

About the Guest Author
This post was provided by Hannah Munson. She helps run If you are interested in writing a guest post, please contact PF Stock at the Email address listed in the sidebar.

1 comment:

  1. Great credit card tips for dummies. Its amazing how many people are ignorant and fall into the many traps set by credit card agencies what with money advances and what not. I myself prefer debit cards to avoid all the unnecessary hassles and risks.