Top 5 Credit Card Mistakes

Credit cards can be an incredibly useful and convenient tool when used properly. The problem is that most of us don’t do that. Some folks know they’re using their cards improperly, while some don’t have a clue. Here’s my list of top 5 credit card mistakes so you can do your best to avoid them.

1. Carrying a balance – Any time you carry a balance on a credit card, you’re asking for trouble. The majority of credit cards charge somewhere in the area of 20% interest ( varies from card to card ) for the privilege of allowing you to carry a balance. On a relatively small $5,000 balance, that could be $1,000 in finance charges – ouch!
2. Making late payments - Many people let credit card bills slide a day or two late, thinking it’s no big deal. If you’re lucky, you won’t get hit with the $30 late fee. Even if you are lucky, your interest rate will shoot through the roof. What was an already high 20% rate could jump to 30% or even higher. All of a sudden that one late payment is costing you a fortune.
3. Making the minimum payment – We’ve all done it at one point or another. We get our credit card statement for $2,000, and the minimum payment due is $40. We write out a check for $40, just until you have more money next month. Fact is, next month isn’t any easier, and the problem builds. Making the minimum payment on your credit cards is a surefire way to keep that same credit card debt for many years to come. Chances are that you’ll end up paying more in interest than on the original debt.
4. Charging things without cash on hand – You see that $2,000 LCD TV that you’ve always wanted, and spring for it. You charge it on your Visa – only you don’t have the two grand in the bank to cover it. You’ve forced yourself into either the #1 or #3 situation above, and you don’t want to be in either. Before you swipe, make sure your bank account can cover it.
5. Not using your rewards card – I’m a big fan of using a rewards credit card for all my daily purchases. If you spend, say, $1,000 on things like gas, food and clothes, you could get between $10 and $50 back by using a rewards credit card. If you use cash instead, you’re basically throwing money away.