The average American has 4 credit cards sitting in their wallet or purse. That number may be, in part, responsible for the fact that the average American is also carrying tens of thousands of dollars worth of debt.
While credit cards are a driver of debt and can carry serious financial consequences, used responsibly, credit cards a valuable tool that provides transactional security and may even pay you to shop.
To enjoy the positives of using credit without being bogged down by the bad stuff, the key is to avoid common credit card mistakes. If you’re unsure of how best to do that, our team has you covered.
Keep reading to learn what pitfalls you should avoid to protect your livelihood.
- Applying Before Your Ready
No rule says you need to have a credit card. Still, most adults rush to get their hands on one the moment they turn 18.
Let us be the first people to tell you that if you have little concept of things like APR, annual fees, what maxing out credit cards means, and the like, you should hold off on getting a card.
Prioritize getting educated on credit over getting your hands on plastic. If you do, life will go much better when you eventually do get approved for your first card.
- Having Too Many Credit Cards
Seeing as how a single credit card serves the purpose of allowing users to make purchases on credit, why does the average person have multiple? There are a lot of reasons for that and most of them aren’t good.
The last thing you want is to make keeping track of your credit balances harder by managing multiple balances when you start on your credit journey. Keep your credit experience on a single card until you have a reason that makes financial sense to expand your credit portfolio.
- Ignoring Your Balances
When you swipe your credit card, you get to make purchases without pulling money out of your checking account. That money you’re borrowing from your creditor is lent with the thought that it’ll be paid back.
Ignoring your credit balance by not paying what you owe will make your balances balloon via interest. We’ve seen $5000 balances balloon to tens of thousands of dollars due to neglect which then requires borrowers to hire a consumer debt attorney or people like credit expert witness Joe Chavarria to help mitigate the resulting mess.
Avoiding this credit card mistakes biggie is as simple as staying aware of what you’re spending and having a plan to pay down the money you use.
- Making Minimum Payments
Some credit cards will let you pay them roughly $35 per month no matter how much money you owe them. Making those payments will keep your credit score safe and your lender happy. Your credit card balance, however, will not be so content.
If you’re carrying any balance on your card, it will grow via interest. That means that $35 minimum payments on a $1000 balance will likely make it so your credit balance grows each month rather than shrinks.
Take the time to understand the implications of interest and how much you actually need to pay when making monthly payments to move towards being out of debt.
- Putting an Irresponsible Authorized User on Your Account
When you get a credit card, your issuer may ask if you want a second card in someone else’s name. If you say yes, that person will receive a direct line to your account, at which point they can charge however much they’d like.
You’ll be responsible for that spending.
Authorized users abusing your credit can lead to financial catastrophe, as has been the case for several people in the past. With that in mind, only authorize users you know will be responsible with your accounts.
- Neglecting to Report Lost Cards
The moment you lose your credit card, report it. That way, your credit card issuer can close your account and send you a new card.
Cards that are not reported may incur charges from opportunists. While credit card account holders are protected against fraudulent purchases, neglecting to be proactive in reporting missing cards could complicate the process of getting reimbursed for unauthorized spending.
- Not Auditing Your Balances
People don’t have to steal your physical credit card to make charges on your account. Plenty of thieves have ways of intercepting your card data online or at terminals across the country.
Once bad actors gain access to your card information, the only way you’ll be able to identify that intrusion is if you catch charges you didn’t make popping up on your monthly statements.
Therein lies the importance of giving your charges a scan every month. If you see something that doesn’t look right, contact your credit issuer to get the issue resolved.
Remember, in the United States, you’re only legally liable for up to $50 in fraudulent charges. Most credit cards opt to make that liability $0.
Avoiding Credit Card Mistakes Means Avoiding Financial Catastrophe
With millions of Americans declaring bankruptcy due to debt annually, you must learn about different credit cards and the credit card mistakes associated with them before you start shopping.
Knowledge is power in the world of financial health. Our team is hopeful that the tips we’ve shared with you give you the knowledge you need to use credit responsibly.
If you’re still scratching your head when it comes to credit, we’ve got you covered. Check out more of the credit card information on our blog to continue fulfilling your need to know.