Here are the five biggest mistakes you may be making with your credit cards.
1. Mindless charging
There’s nothing wrong with charging everything, as long as you’re doing so responsibly. This means you know you’re only charging what you can truly afford, you’re mindful of your credit utilization ratio
and you make your payments on time. The problems come along when you’re mindlessly charging, and not paying attention to how much debt you’re accumulating throughout the month.
How to break this habit: It is important to create a budget and stick with it. This way, you have a better idea of the funds you’ll have to use when that statement arrives — ideally helping you pay it off in full. So, that means if you’ve hit your limit for dining out, it’s time to eat at home.
2. Only paying the minimum Most of us know that we should pay more than the minimum on our cards, as this helps us avoid racking up major interest fees on top of what we spend. There are times when several big expenses all come at you at once and you just can’t afford to pay the card off in full.
How to break this habit:
Set a goal for when you’ll get back on track and work toward it. (To help you figure out how long this may take, try the credit card payoff calculator tool
.) The biggest priority is to pay your statement on time, and at least pay the minimum requirement. It may also be a good idea to try avoiding adding new charges to the card while trying to pay it off.
3. Forgetting a payment When you don’t pay your statement in full, you end up paying interest fees on what you still owe. If you miss a payment, or pay late, you’ll be hit with a late fee. Say your card issuer charges a $35 late fee and you make three late payments in a year, you’re paying more than $100 just in fees for not being on time, not to mention any interest charges you accrue.
How to break this habit: If you have a problem remembering when your statement is due, set up a reminder on your phone or consider setting up an automatic payment. However, if the problem is because you have a lack of funds, talk with your issuer and see if you can change the date the balance is due to one that is more in line with your pay schedule.
4. Ignoring your rewards If you have a rewards credit card, whether for travel, cash back or something else, you don’t let those rewards go to waste. Especially if your card comes with an annual fee. You may lose your points if they aren’t used or the account is inactive within a set period of time, so it’s a good idea to read the fine print to know the rules that come with your card. If not, you could be missing out on big rewards.
How to break this habit: As we just mentioned, make sure you’re familiar with the restrictions that come with your card and then follow through on using your points. Maybe you could use your cash back around Christmas to help offset holiday expenses, or your travel perks to help you offset the cost of your vacation.
5. Not knowing how your card usage impacts your credit You may feel you’re using your credit card(s) responsibly. After all, you pay your statement on time every month and usually do so in full. But if you’ve never reviewed your credit profile, or do so infrequently, you may be unaware of some problems that are damaging your scores.
How to break this habit:
You can get free copies of your reports from the three major credit bureaus — TransUnion, Equifax and Experian — once a year by visiting AnnualCreditReport.com. Look for any mistakes that could be bringing down your scores and file disputes. (This guide
can help you learn how to do that.) You can also see a snapshot of your credit reports
on Credit.com. In addition to two free credit scores, which are updated every 14 days, you’ll also be given an assessment of steps you can take to help you improve your scores, or even how to stay on the right path.