Credit card can be great financial tools. Using them responsibly can help you buy the items you want, earn rewards, and build your credit. However, problems arise when you develop bad habits with your credit cards.
Here are five bad credit card habits that you should consider taking action to get rid of immediately.
1. Insane charge
Of course, putting all of your spending on your credit card is a great way to quickly accumulate reward points. There is nothing wrong with loading everything, as long as you do it responsibly. This means that you know that you are only charging what you can really afford, you are aware of your credit utilization rate and you make your payments on time. Problems arise when you charge mindlessly and don’t pay attention to how much debt you accumulate throughout the month.
How to break this habit: It’s easy to get into debt on a credit card when the card is so easy to use, especially if you’re looking for rewards. But to break this habit, it’s important to create a budget and stick to it. This way, you have a better idea of what funds you’ll need to use up when that statement arrives, which will ideally help you pay it off in full. So, that means if you’ve reached your limit for dining out, it’s time to eat at home.
2. Pay only the minimum
Most of us know that we should be paying more than the minimum on our cards because it helps us avoid accumulating large interest charges on top of what we spend. But there are times when you have several big expenses coming back to you at the same time and you just can’t afford to pay off the card in full.
How to break this habit: Even if you can’t pay off your card in full for a few months, set a goal for when you’ll get back on track and work towards it. (To help you determine how long this may take, consider using this credit card refund calculator.) Beyond that, the highest priority is paying your statement on time, and at least paying the minimum required. It may also be a good idea to try to avoid adding new fees to the card while trying to pay it off.
3.Forget a payment
When you don’t pay your statement in full, you end up paying interest charges on what you still owe. But that’s not what we’re talking about here. If you miss a payment or pay late, you will be subject to a late payment penalty. Suppose your card issuer charges a late fee of $ 35 and you make three late payments a year, you are paying over $ 100 in fees for not being on time, let alone the fee. interest you earn. (Plus, missed payments can cause big damage to your credit – more on that in a minute.)
How to break this habit: If you’re having trouble remembering when your statement is due, set a reminder on your phone or consider setting up automatic payment. However, if the issue is due to a lack of funds, speak to your issuer and see if you can change the date the balance is due to a date more in line with your compensation schedule.
4. Ignore your rewards
If you have some type of rewards credit card, whether it’s for travel, cash back, or whatever, you don’t want to lose those rewards. This is especially true if your card has an annual fee. Depending on the card, you may lose your points if they are not used or if the account is inactive within a set amount of time, so it is a good idea to read the fine print to know the rules that come with your card. . Otherwise, you could be missing out on some big rewards.
How to break this habit: As we just mentioned, make sure you are familiar with the restrictions that come with your card, and then track the use of your points. Maybe you could use your Christmas cash back to help offset vacation expenses, or your travel perks to help offset the cost of your vacation.
5. Not knowing how using your card affects your credit
You may think that you are using your credit card (s) responsibly. After all, you pay your statement on time every month and usually pay it in full. But if you’ve never reviewed your credit profile, or if you rarely do, there are some issues that you might not be aware of that are affecting your scores.
How to break this habit: Make sure you review your credit reports at least once a year. You can get free copies of your reports from the three major credit bureaus – TransUnion, Equifax, and Experian – once a year by visiting AnnualCreditReport.com. Look for mistakes that could lower your scores and file disputes. (This guide can help you learn how to do this.) You may also see a snapshot of your credit reports on Credit.com. In addition to two free credit scores, which are updated every 14 days, you will also receive an assessment of the steps you can take to help improve your scores, or even how to stay on track.
Sign up for our credit report card and receive the latest tips and tricks from our team of over 50 credit and money experts, along with a FREE credit score and action plan. Register now.
Note: It is important to remember that interest rates, fees and terms on credit cards,ready and other financial products change frequently. As a result, the rates, fees, and terms for credit cards, loans, and other financial products cited in these articles may have changed since the publication date. Be sure to check current rates, fees, and terms with credit card issuers, banks, or other financial institutions directly.
Sean Bryant is a Denver-based freelance writer specializing in travel, credit cards and personal finance. With nearly 10 years of writing experience, his work has been featured in many of the industry’s top publications. He holds a Bachelor of Arts in Economics.