Credit Card Mistakes that Leads You to Debt
Credit card in itself is the biggest factor leading to debt and of course a financial crisis. But this does not stop people from availing it in order to make life extremely comfortable. All this because money can buy you luxuries and these luxuries in turn makes you happy. So yes, this is one of the major driving forces for people to avail for a credit card and make life seem like a bed of roses.
Little do people realize that this trend among people wanting to have a credit card is the main reason for them to run into debts? Unfortunately this is true and it is important people start realizing this from a very early age before falling into the shackles of debt. Credit card definitely makes transactions smooth and convenient but they also have the potential to make people fall into financial trouble.
It is important that you manage your credit cards well because failing to do that attracts unnecessary problems and financial hassles. Let us highlight the 4 major problems that people often fall into due to lack of poor credit card management.
- Making Minimum Payments – You might assume that the $30 monthly payment is extremely manageable and that is exactly what you pay every month. This implies that you will be in debt for a longer time span and owe a lot more interest rate. It does not end here, the more you tend to use your available credit, approximately 30% of it or even more, the higher will be the negative impact on your credit score. It is of utmost importance to keep your credit score good because a bad credit score reduces chances of getting a loan in the future. So it is important that you make sure that the credit score is not getting hampered at all. Make sure that you always pay more than the minimum payment and keep your credit score in good state.
- Availing all Reward Card Offers – There will be instances when you will be offered a discount on the purchase you are currently making. But in order to avail that discount you need to sign up with a store credit card. These discounts act like a temptation and in most cases people jump immediately at such offers to avail the discount. But it is important for you to know that the retail cards have the highest interest rates and fees. So if you are tempted to avail the discount, then make sure you read the details those are mentioned in the card. The more you are aware of what you are going into, better will be the chances that you will not run the risk of paying a higher interest rate. Availing a card just because you will get a discount is just not the right approach because a temporary discount can lead to a lot of problems in the future. One of it would be to pay a higher rate of interest.
- Ignoring Statements – Never ever dismiss the credit card statements when you receive it on a monthly basis. Many people completely ignore or out of laziness do not realize the importance of this statement. Always remember to read the credit card statements carefully, failing to do that can lead to debts. This statement is basically the snapshot of your credit behavior in the previous month. Tracing that will help you cut down on the unnecessary expenses. Make sure to read it every month in order to balance out the expenses evenly so that you don’t have to spend excessively on unnecessary items.
- Looking for Higher Interest Rates – Transferring your balance into someone else’s account is one of the most common practices. The main reason for doing so is because the introductory credit card will have a lower rate of interest. Even if you are availing this option, it is important for you to remain very careful so that things don’t go out of plan. Unfortunately, if that does happen then always remember you might have to end up paying an even higher rate of interest than estimated. In such a situation if you are not cautious enough, then you will be made to encounter an enquiry on your credit report along with a balance transfer fee. Failing to pay the balance transfer fee can lead to a new interest rate that will be higher than what you used to pay previously. So be very careful when availing this step for debt relief.
These are some of the most common problems that people face when they are not able to manage their debts well. It is important that you understand the financial situation that you are in and make the most of it. Since delay can lead to debt, moreover debt is a common problem among people who make these mistakes while handling their credit card.
