It’s crazy to think that some people still avoid using a credit card to this day. I don’t know if they don’t trust themselves, which I guess is understandable they’ve gotten into credit card trouble in the past and don’t want to follow down that road again, or if they’re just not aware at the good in credit cards instead of the bad. I guess when we were young credit cards may have given off the impression that if used it meant you didn’t actually have the available money to make the purchase, which could have been true for some, but that doesn’t mean it’s still true today. Sure, paying interest will hold you back from your ira vs 401k, but if you can avoid any credit card mistakes, using a card actually can help protect your finances from fraud, give yourself a grace period to pay back, and provide excellent rewards on purchases.
First Not Checking Your Credit Report
No matter how many accounts you have open, it’s always a good idea to check your credit report to ensure that all information being reported is accurate, as you know how much fraud occurs these days. The major credit bureaus provide a free copy of your report once a year so you can at least check then, although they do not include your score. To see your credit score you can just look on your online statement and it will show you and you can then monitor month over month to make sure it’s trending in the right direction.
Selecting the Wrong Credit Card
There are so many cards out there, a virtually endless supply, that you probably get offers in your email and regular mail every day. With various names, brands, and keywords like “black” and “silver”, how do you know what is the best? Well for starters, you probably want to avoid an annual fee, but that would depend on two of the most important features on a card, which are the interest rate on purchases, and the rewards they offer in return on purchases.
Not Taking Advantage of Rewards
To me, the best reason to use a credit card, and one can argue that should be used for every purchase that you make, is based on the rewards. By making the purchases that you would normally be making anyways, you can earn points that you can redeem for just about anything from gift cards to points, to plain old cashback, which is nice. Avoiding taking advantage of this would essentially be leaving free money on the table, so if you can use on your normal purchases, you can reap the benefits, but once you see the rewards add up it could cause you to charge more than you should, and if your carryover a balance the interest you’re stuck with would wipe out any rewards that you earned.
Missing Out on Deals with Store Cards
If there are certain stores that you shop at the most, you could be missing out on discounts by not having their store card. From grocery, clothing, and electronics, signing up for a store card could give you an initial percent off the purchase, while going forward you can earn exclusive coupons and additional money off by continuing to use that card, so it could be worth taking a look, of course, you’ll still have to be mindful on the balance and avoiding going on a shopping spree often.
Making Minimum Payments
If you do carryover a balance to the next month you will start to get hit with interest and your statement will give you a minimum payment to make that month. While making only that payment will satisfy your account for the month and leave in good standing, but it will do practically nothing to your balance as most of that will go towards interest. In order to get out, and stay out, of debt, the largest payments you can afford are suggested so you can really put a dent into that balance and avoid interest to continue to pile up.
Not Paying Attention to Spending
Credit card debt can get out of control quickly if you’re not careful so it’s always important to track spending. Not only can you see up to the minute account info online or the app on your phone, but it may be beneficial to pull last month’s statement and go line by line to see what were necessary purchases and what were, well, unnecessary and probably could have been avoided so you can maximize any money you can free up by reducing spending.