Are You Making Some Of These Credit Card Debt Mistakes?
Credit cards are excellent tools if the cardholder uses them sparingly and handles them with care. They can provide a source of backup funding and a boost to one’s credit score. Credit cards can also ruin a person’s reputation and leave him or her with limited reparation options. To avoid ending up in a fast sinking credit card debt vessel, one should be mindful of the following eight worst credit card debt mistakes:
Lenders have a habit of bombarding consumers with credit card offers. Sometimes these offers are very enticing. Not many people like to turn down free money. However, having too many open accounts can hurt a consumer in many ways. For one, when a lender sees multiple credit card accounts on a debtor’s credit profile, it may assume the individual is irresponsible and impulsive. The lender may use this as the basis for a denial. Not to mention that opening too many accounts is one of the misdeeds you can do to your credit score. This is because each account opening will put a hard pull on your score.
2. Using the Entire Balance
Debtors are supposed to use their credit cards. However, spending the entire balance every month can actually hurt a person’s credit rating. Available balance is part of the mathematical equation that makes up a person’s credit score. When lenders see that a person has nearly no available credit, it sets off a red flag. Debtors should always keep at least 50 percent of available credit on all credit cards.
3. Skimming the Terms
Before any consumer applies for a card, he or she should always thoroughly read the terms. Many debtors fall behind because of skipped information. Consumers should always read the entire agreement and pay close attention to the fees. Failure to understand them can lead to bigger credit card debt.
4. Making Late Payments
Paying late is the worst thing a debtor can do besides not paying at all. Not only does it look bad on the person’s credit report, but it also gives the lender the opportunity to attach more fees. Late fees and interest charges can send a debtor into a fast downward spiral.
5. Only Making Minimum Payments
While it is good for a customer to make at least the minimum payment every month, it is even better if that person adds extra funds. Interest rates start to kick in after the grace period. The lender attaches those interest rates to the balance increasing credit card debt. If a person is only making minimum payments, most of the money goes toward interest. Financial Post even shares that minimum credit card payment can lead to delinquency.
6. Being Passive
Things happen in life. Sometimes people lose their jobs through no fault of their own. When something like this happens, a debtor should always contact the credit card company and try to make an agreement before the card payments get behind. Doing nothing can have the debtor in trouble in a very short amount of time. A good debtor should always be proactive.
7. Going Over the Credit Limit
Going over one’s credit limit shows a lack of responsibility. When lenders see that a person constantly goes over the limit, they assume that debtor is careless. It will be extremely hard for a person like that to receive a credit line increase and products from other lenders. Fox Now even shares how credit limit plays into your credit utilization ratio.
8. Using Cards Frivolously
A debtor should use credit cards for emergencies. He or she should never use a card like cash or to purchase whimsical items. Using cards to buy unnecessary products is not good because it depletes a person’s emergency funding.
A debtor who avoids making these eight mistakes is a smart debtor. A smart debtor will always receive more credit products and opportunities.
If you have made too many credit mistakes see what we can do for you. Start with a free debt analysis and see how much you can save.