Friday, February 8, 2013

Top 5 Common Credit Card Mistakes

Applying for a credit card commonly requires easy steps: submission of an accomplished application form, ID and another document such as the certificate of employment or copy of the income tax return for the past two years.

However, maintaining credit card usage and handling debt are not as easy as they sound. Rather, they are nerve-wracking as much as they are comforting. Why comforting? Of course, you get both the luxury and privilege of borrowing money from a trusted institution and pay it later to continue your lifestyle.

In this article, we will talk about the common credit card mistakes that you should avoid and actions you can do to rectify them:

1. Not understanding the implications of late payments

If there are outstanding credits due in your balance, don't intend to play with fire and pay them right away. Late payments will incur you bad credit score and negative credit rating in your records. You will also need to pay some late payment charges.

If you admit that you're a bit forgetful in paying for the bill, you can sign up for an automatic payment facility that gets money from your account and automatically pays for your credit card balance.

2. Not knowing the date when credit card payment is due

You may be confused on the dates shown in your credit card bill. If you're unsure, check with the credit card company on the details of the bill. Ask for help when necessary and don't just make your own assumptions.

In general, the due date is not the deadline for sending your payment; it is when the merchant expects the receipt of the money. If you don't deliver payment on that deadline, you will experience the consequences of a late payment. A good practice is to make payments in advance. It's not hard to mark your calendars with reminders, right? :-)

3. Collecting many credit cards that results to difficulty in tracking credit card details

Some people just want to be collectors of credit cards to stuck in their wallets. These credit cards look good when piled up? I don't know. What I do know is that there are more problems in terms of tracking down the credit card details monthly such as the interest rates, balances and payment due dates.

It's okay if you have five and more credit cards as long as you can still handle them all efficiently. But if you can't, just stick with one or two that you can manage.

4. Compromising on credit cards with higher interest rates for loyalty points

It is common for credit card companies to offer promotions such as the loyalty program where you have to buy stuff to earn points and points can be converted to vouchers or gift certificates to make a purchase. Another one of the most used tactics is the collection of miles for a flight. This is also a point system where you have to earn miles that can be converted to the number of kilometers you can travel across the globe with their partner airline company.

You can ride on these promotions and use your credit card for points. But note that these cards may be the ones which have additional interest rates in the transactions. The tendency is to pay up more. In the end, you are only fooled to spend and spend extra using the credit card. It could be better if you withdraw cash from the ATM and use cash, or use a debit card to swipe for your purchases.

5. Not reading the terms and conditions

You may be signing up already for the agreement that you will be put to a death sentence without you knowing! Never sign up the terms and conditions of the credit card application without reading and understanding them in full context.

End Notes

Applying and using your credit card does not make you financially free or financially independent. On the contrary, it requires you to be more careful on your expenses. You have to be sure to clear off your debts and remember always to pay in a timely fashion.