Don't Make These 5 Credit Card Mistakes |
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by: Janna Weiss
Credit cards. Those two words provoke a pretty strong emotional response in lots of people. There are those who insist credit cards are a necessary component of a good credit history. And there are others who warn people away from anything wallet-sized and made of plastic. Most of us fall somewhere in between: we carry cards and use them, but we wish we could go back and fix some of the mistakes we made as new cardholders. Read on to learn from our mistakes.
Mistake #1: Too Much of a Good Thing
It’s good to have a credit card. Sometimes you need two major lines of credit. Three can help your credit score. More than that, and you’re setting yourself up for a fall. If you apply for a lot of cards all at once, lenders might think you’re gearing up for a spending spree. This will make you seem like more of a credit risk than you really are, and may keep you from getting approved for loans. And, of course, with greater credit limits comes greater temptation. Stick to two or three good cards.
Mistake #2: Getting Suckered by Introductory Rates
Remember when you’d open your mailbox and fifty “pre-approved” “zero-interest” credit card offers would come tumbling out? Those days are gone, but introductory APRs are still alive and kicking. Always make sure you read the entire cardholder agreement before you sign up. You may find that the low interest rate you agreed to will shoot sky-high after a few months.
Mistake #3: Making Late Payments
Sometimes late payments are unavoidable. But if you’re consistently late, or if you’re more than 30 days behind schedule, your credit report will reflect it. Plus, you’ll have late payment fees and up to six months of penalty interest rates (usually 29.9%!). If you suspect that you’re going to be late on a payment, do yourself a favor and call the card issuer to let them know. If this is your first tardy payment, they’ll work with you.
Mistake #4: Overspending
Some people think of credit cards as free money. Even when you’re conscientious, it’s easy to fall into a habit of carrying a balance from month to month. Do this too often, and you’ll hit your credit limit – and exceed it. Then you’ll be subject to over-the-limit fees, as well as a high credit utilization ratio. Being over the limits on your cards will drop your credit score. Avoid doing it at all costs.
Mistake #5: Not Reading Your Monthly Statement
It’s amazing what credit card statements can reveal. If you pay your bill each month without looking at the statement, you could be throwing your money away on unauthorized charges and billing errors. Some scammers even choose to make small purchases on their victims’ credit cards, banking on the fact that the victim won’t notice. Don’t let anyone abuse your credit! Glance over your monthly statements to make sure everything’s on the up and up.
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