5 Credit Card Mistakes to Avoid
A credit card can be an incredible asset when it comes to managing your finances and building credit. However, if you don’t use credit cards correctly, you could fall into the trap of making common mistakes that can end up costing you money – and damaging your credit score.
Let’s take a look at five credit card missteps so that you can avoid them and keep your credit score strong.
1. Choosing the Wrong Credit Card for Your Needs
Getting a credit card is a financial commitment. Building and maintaining strong credit enables you to get approved for loans easier and ones with better rates, apply for housing… the list goes on. That said, it’s important to choose a credit card that you can afford – and manage well. Because bad credit can wreak havoc.
While a card may offer attractive rates or rewards, does it really fit your needs? Is it the best card to build or repair your credit? Are the rewards you might get worth higher rates or fees? As you can see, you need to ask yourself the right questions and do your research to get the answers. You shouldn’t take the decision lightly.
Need help choosing a credit card? We’ve got a quick read that can help you make the best choice for your lifestyle.
2. Not Knowing Your Card's Terms
Nobody enjoys reading the fine print. But when it comes to credit cards, it’s crucial to know the terms of your card. Otherwise, you could run into unexpected fees and charges. Pull up a chair, grab a cup of coffee, and pour over your card’s details.
Make sure you understand terms such as introductory rates, balance transfer fees, and anything else that could potentially lead to you having to pay more. For example, just because you have a zero percent APR doesn’t mean you’ll never pay interest. That rate could be an introductory rate and only last a certain period of time after you open that account.
You need to know when that introductory rate ends so you can pay off your card balance in full and avoid being charged your card’s regular purchase APR rate. So again, know and stay current on the rates and terms of any of your credit cards.
3. Not Making Monthly Payments On Time
A credit card payment that’s 30 or more days late can have a significant impact on your credit. Your payment history is the greatest influencing factor on your FICO score, meaning that paying your credit card bill on time is paramount.
While it’s possible to reduce the impact of late payments over time (by paying on time), late payments typically remain on your credit history for seven years. This can seriously hamper your ability to build your credit.
To ensure you pay your credit card bills on time, set up autopay through your bank or lender. Some lenders, upon request, will send you reminders as well.
4. Making Only Minimum Payments
It can be tempting to make minimum payments, as they seemingly can make debt more manageable. However, interest charges add up quickly. Plus, as your credit card balance increases, so does your credit utilization rate.
Credit utilization rate is the percentage of your available credit using at a given time. If your card balances increase above 30% of your credit limits, the impact on your credit score can be drastic.
So, make it a priority to pay down any credit card debit. If possible, use other payment methods to help you achieve that goal. At the very least, make minimum payments sparingly.
5. Overspending Using Your Credit Card
Let’s be honest, it’s easy to lose track of credit card spending. Who doesn’t enjoy treating themselves to a new pair of shoes or set of golf clubs when you don’t feel the immediate impact on your bank account. After all, you are going to repay that credit card charge later.
It’s also easy to overspend when you are chasing rewards. But is it worth the chase? Let’s say you have a credit card that offers 1 percent cash back. You typically spend $1,000 a month on that card, earning you $10 in rewards.
However, you start convincing yourself it’s OK to spend more on that card because of the cashback reward. Your monthly card balance increases to $1,500. Is it worth spending $500 more on that card to earn an extra $5? Probably not.
Avoiding credit card mistakes is key to maintaining a healthy credit score. Make it your mission to use your cards responsibly and pay off debt in full each month. Resist the temptation to overspend or fall behind on payments. Take advantage of tools like online management and budgeting apps to keep on track.
To learn more about TwinStar’s Visa® credit cards, visit our Visa cards page. We hope this article has been helpful and can help you get more out of using credit cards – no matter if you just got your first card or have well-established credit.
Apply for a TwinStar Visa® Credit Card Today
Whether you need to build credit or have established credit, we have the right Visa® credit card for you. Take advantage of no balance transfer fees, special introductory rates, low APRs, no or low annual fees, and 24/7 fraud protection.
To learn more about our Visa credit card options or apply for a credit card, visit TwinStarCU.com/Visa.