6 Major Credit Card Mistakes You're Making Without Realizing It
When used properly, credit cards offer tremendous value and convenience. But abused credit cards can become a suffocating burden and financial wreaking ball.
The truth is, you're better armed than ever to exploit the good and avoid the bad of credit cards. With new technologies, mobile alerts and a few astute strategies and tricks, you can convert your credit card into an almost risk-free payment panacea.
Here are six common mistakes to avoid:
1. You trust yourself to pay your statement on time.
Most of us have every intention and ability to pay our credit card bills on time. Unfortunately, we either forget, or life gets in the way of a timely payment.
But there is an alternative. Take bill pay out of your hands completely, and pay via pre-authorized payment.
That's right. You can set up your credit card account so you either pay the minimum payment or the entirety of your credit card statement every month directly from your checking account.
Do so, and you'll avoid those nasty $39 late payment fees. Not to mention, you won't be ruining your hard-earned credit score.
2. You carry balance on a rewards or store credit card.
Aside from pay day loans and loan sharking, there's no more expensive debt than credit card debt. While I don't recommend you get into debt in the first place, if you already have some, it's worth noting not all credit card debt is created equal.
Rewards and store credit cards tend to have the highest interest rates, ranging from 19 percent to 30 percent. However, you can transfer that debt to a balance transfer credit card, which can drop your interest rate to 0 percent for 12 to 36 months.
3. You increase your credit line just because you can.
Banks love to offer you more credit. The higher your credit line, the more you can spend and the more you can borrow.
Call the bank and reduce your credit line to a number you can afford. You might find yourself bumping up against your credit line from time to time, but if that's the case, just pay some of your balance before your payment is due to free up additional line.
Some people make payments every week. This will ensure you never spend more than you have.
4. You don't read (and re-read) your credit report.
Too many people don't read their credit reports.
Your credit impacts your credit card, line of credit, mortgage, utility rates and insurance rates. It can even determine where and if you can rent.
Many credit card issuers are now making your credit report and score available to you for free. You have no excuse. Just read it.
It will tell you if someone's fraudulently opened up an account in your name. It will tell you if you forgot about an outstanding debt. It will even tell you if your credit score is trending in the wrong direction, and why this is happening.
5. You don't stay alert.
The biggest risk when it comes to credit cards has always been spending more than you thought you did over the course of a month, simply because you didn't receive your statement in time.
It was the old envelope surprise: "I spent how much?"
New technologies take all the surprise out of credit cards. You can get alerted for credit card purchases greater than a specified amount when you're within X dollars of your limit, when it's used at an ATM, when a payment is due, when it's received and so much more.
6. You take out a cash advance.
There's no more expensive way to use your credit card than by taking out a cash advance. If you take out $100, you'll likely be charged around $10 or 3 percent right off the bat, whichever is higher.
You'll also get charged a higher interest rate of 24.99 percent, and you'll get charged interest from the moment you take out the advance. The impact? If you pay your $100 back within 30 days, it will have cost you $12.
The lesson? Use your debit card for cash. It's far cheaper.
So, there you have it. My basic advice is to do everything you can to use your credit card as a payment device, as opposed to a credit facility.
Used that way, your credit card will be a rewarding, convenient and safe payment alternative.