Common Credit Card Mistakes

By: Joseph Kenny

For most of us who use credit cards, it is plain that regardless of the convenience and benefits of credit cards there are some serious disadvantages or at least so potential problems associated with them as well. It should also be clear that it is almost mandatory in our modern, consumer-driven world, to have at least one credit card. Yet, many go way beyond just one, having as many as five or six credit cards and all of them carrying substantial balances. The major problem with credit cards is misuse. The consequences of misuse can be serious.

There are actually some common credit card mistakes that cardholders fall into at one time or another. Depending upon the user, the mistakes can multiply and become crippling habits that leave you in terrible financial circumstances. What are some of these mistakes?

Late payments - While this should be an obvious one to avoid, for many cardholders, not paying bills on time becomes normal. Late payments not only tear down your credit rating, they can also cost you more money since most card companies charge late payment fees. Another way you lose money is through interest rate increases.

Minimum payments - Another mistake that cardholders get into is just sticking with minimum payments month after month. The reason for this that most of what you pay out of minimum payment is used to pay on interest rather than the principal of your balance amount. This means that you will never make a dent in that balance since all of your money will be used to pay for card interest. You will never put an end to your debt paying minimum payments.

Paying for essentials - It is often hard to resist using your credit card to go to the grocery store, when you're dining out at a nice restaurant, or paying utility bills, but you really should avoid this pitfall. Doing this consistently without putting a cap on such spending can be a fast way to big debt. It may mean that you are trying to live beyond your means and that you need to reestablish some sort of budgetary constraints on spending.

Impulse purchases - Closely related to using the card for essential items or expenses is using them too casually and making what are called impulse purchases. This means that you see it, you know you have the funds on your card, and you walk out of the store with it. All of this is done without a thought to the overall consequences to your finances. Many cardholders are caught under the spell of out of control spending because they do disconnect the card balance from the interest attached to most purchases. If they had used cash (if they had it) rather than the card, they would have saved far more money.

Cash advances and withdrawals - Cash advances and withdrawals are not meant to be used as an expedient to get fast cash when you need it like using an ATM. They should only be used in emergency situations. Not only will you be charged fees for the withdrawal at far higher rates than normal, and if you take out a large sum, this inflated rate becomes your regular rate until you pay down this amount.

These have been but a few common but serious mistakes that credit card users sometimes make. For many of these situations, it is not a single misuse that creates the problem it is establishing a pattern of misuse that increases the financial burden needlessly. Bear these things in mind when you use your card. Be a responsible user!

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