10 Common Mistakes In Holding Credit Cards
What makes a good credit card holder? What are the credit card mistakes that should be avoided by all credit card holders? Here is a list:
1) Overspending Credit cards are great tools in building credit but if not used carefully, credit cards can also be a trap to uncontrolled spending. Since credit cards are easy to carry and easy to use, it’s also easy to lose control of one’s spending. Thus, self-discipline and a strong sense of responsibility must be practiced by all credit card holders.
2) Taking out cash Credit cards today can also be used as debit cards. Many credit card holders do not realize that each time they take out cash from their credit card, they are instantly charged with interest. If you need cash, don’t take it out from your credit card.
3) Paying only the minimum Submitting only the minimum payment from your balance is a very bad habit. As long as your balance is not paid in full, the balance is carried over for the next billing period and the interest accumulates.
4) Being late or missing payment Being late or missing your credit card payments leaves a card holder with more debts that he already has. Late penalty charges and high interest rates can badly hurt a person’s credit.
5) Not shredding credit card receipts Identity thieves look into trash bins in search of used credit card receipts. These thieves make use of any personal information they can get such as your bank account number so they can use it against you. Before throwing away credit card receipts or billing statements, make sure that they are completely shredded.
6) Not checking your credit card statement Some credit card holders overlook the importance of reviewing credit card bills for accuracy. You could be paying for charges you never make if you don’t make sure that your billing statement is correct.
7) Throwing away expired credit cards When you receive your new card, make sure that you properly dispose the old one. Cutting them in half isn’t enough, as identity thieves can still get details out of it. Instead, cut them into small pieces and do not throw them in just one garbage bin.
8) Applying for a very large credit A large credit gives you more privilege to spend big on your account. If your monthly income isn’t suffice to pay for such a large credit, it would be better to settle for a credit card with a lower credit limit.
9) Applying to different credit card companies at once Submitting too many credit card applications to different companies can be bad for your credit score. Apply only to a credit card company you’re seriously considering.
10) Maximizing your credit If you’re using your credit limit to the full, that’s a clear sign that you’re spending too much on your credit card. It is advised that a healthy spending should not go beyond 30% of your credit limit.
Save Your Money: Avoid Top 10 Credit Mistakes
Here are the top 10 common credit mistakes that you need to avoid to boost your credit score and save you money in loan costs
1. Closing credit cards that you’ve had for a long time. How long you’ve had credit plays an important role in determining your credit standing. Creditors prefer borrowers who have a long record of credit history. Closing credit cards that you’ve had for a long time is a bad move since it will be like deleting a part of your credit history. If you think you own too many credit cards, consider which accounts to close and do not close the ones you’ve had for many years. If the problem is that your old credit cards come with high interest, you don’t have to use them on a regular basis. To prevent them from automatically closing, you may use them once every few months to buy an inexpensive item. This way, you can immediately pay the balance in full and avoid paying for interest.
2. Missing on your credit card payments. Your ability to pay and how responsible you are in paying your debts are all reflected in your credit report. Obviously, missed payments will put you in a bad light. Other creditors will deem you as a high-risk borrower and you will not have the privilege of obtaining better rates when you apply for loans.
3. Using your credit limit in full. If you are in the habit of frequently maxing out on your credit limit, you are putting you are badly damaging your credit reputation. Those who use their credit limit in full or exceed their allowable credit are regarded as high risk. Using up your credit is also a clear sign that you are spending more than what you can afford. Credit card holders must all be aware not to exceed 50% of their allowable credit.
4. Not regularly checking your credit report. Sadly, many consumers neglect the practice of checking their own credit report. However, being aware of your credit report is one way to protect your account from fraud, illegal charges and identity theft. It also helps you keep up with your due dates of payment to your different creditors. It is recommended to get a copy of your personal credit report at least once every six months.
5. Not understanding your rights as a consumer. The Fair Credit Reporting Act has established rules and regulations for all lenders to follow. Do not let a creditor take advantage of you. Know your rights as a borrower.
6. Not being aware of the three major credit bureaus. Most consumers do not know that the three major credit bureaus (Equifax, Experian, Transunion) work independently in creating credit reports. You may request a copy of your credit report from any of these bureaus and if you find some corrections, do not hesitate to inform the bureaus right away.
7. Not building credit. Not having any credit in your account is a mistake. Creditors are not the only ones who check on one’s credit history. Employers and landlords also use an individual’s credit history as a basis for accepting applications. Without a credit history and a credit score, you will be very limited in your dealings.
8. Owning too many credit cards. Contrary to what many believe, owning a lot of credit cards will not boost your credit score. It is how you handle your credit card accounts that matters. Owning two different credit cards should be enough as long as you can keep up with your payments.
9. Using your credit cards as debit cards. Although some credit cards double as debit cards, a high interest rate is immediately charged right after your cash advance is made.
10. Submitting too many credit card or loan applications. Some consumers send applications to credit card or loan companies just to free stuff. However, each time you submit a credit application to a lender, an inquiry will be made on your credit report. The number of inquiries and the creditors who inquired your credit will also be reflected in your report. Shopping for credit will lower your credit score especially if creditors decline your application.
10 Worst Credit Card Mistakes College
It is a sad fact that a great percentage of people who are stuck in bad credit are students. The lack of responsibility and awareness has put many students in a bad credit situation. Here are the top 10 worst student credit card mistakes that should be avoided:
1. Signing up to get a freebie
Many credit card companies offer free stuff such as free shirt, caps, mugs, etc. to attract clients. Some students think that signing up just to get the free stuff is a harmless practice. However, all your credit card applications are reflected in your credit report and too many inquiries on your account create a negative impression on your credit standing.
2. Using student credit cards to play on-line games
Many students found themselves in huge debt because of online gambling. Playing on-line using a student credit card can be a tempting hobby but you’ll also be putting your credit online.
3. Using student credit cards for shopping or dining
It is so convenient to go shopping or dine in a restaurant with your friends using your credit card. Unfortunately, this is also a quick and easy way to get stuck in debt. Many students do not realize that they’re already over spending until it’s too late.
4. Carrying a balance
Student credit cards can come with as much as 15% interest rate. A student who’s in the habit of carrying a balance on his account will undoubtedly find himself paying for more interest than he can afford.
5. Opening store credit cards to avail of discount
Many stores offer a store credit card in exchange for discounts. This may seem like a great way to save on your shopping. Don’t forget that despite the discounts, these cards come with high interest rates. Unfortunately, some students make the mistake of opening too many store credit cards at every boutique they shop. As a result, their spending gets out of control and their credit history is damaged.
6. Not paying on time
Students often fail to pay their balances on time. Thus, these students end up paying for high interest rates and penalty charges.
7. Using the credit card to buy an engagement ring
Many students used their credit card to buy a very expensive diamond engagement ring for their special someone. Most of them do not realize that it can take years paying off their credit.
8. Treating friends for a meal or a party.
College students love to eat out and party and sometimes a student may offer to pay the bills for her friends. Although this is a generous gesture, students should realize that they have a stable job to support them yet and that spending unnecessarily can hurt their credit badly.
9. Not keeping the credit card in a safe place.
Many students make the mistake of leaving their credit card inside their dormitories. Dorms often have open door policies so valuables can get stolen easily. Thus, students should be especially careful about where they keep their credit cards.
10. Lying about their charges.
Some students deliberately spend too much on their credit cards. Then, they call their credit card issuer and report that the card has been stolen. Obviously, this is illegal and must never be done.
How Students Can Manage Their Student Credit Cards
Surveys prove that many college students graduate with unpaid debts on their student loans which can amount to $20,000. Those who are still in college are faced with credit card debts amounting to $7,000 or even more. Even worse, there are many at a young age of 15-25 have already filed for bankruptcy. If you’re a student who owns a student credit card, these staggering surveys should definitely concern you. What can you do to avoid falling victim of bad credit?
Here are some valuable tips you can in your personal life as a student to help you manage your finances wisely.
Make a Commitment
Bad credit usually results from splurging or uncontrolled spending. In order to avoid paying for unreasonably high balances, as a student you should have the will to restrain yourself from spending on things that are not really necessary. Every time you plan on buying, ask yourself, “do I really need this or do I just want it?” If you know that you can get by without making that purchase then, have the will to back out.
Pay Cash
Don’t use your credit card on every little thing you need. When you eat outside or go to the movies, don’t charge it on your credit card. You should change your outlook about owning a credit card. It doesn’t give you the leeway to spend on all the things you want. Always keep in mind that you are still responsible in paying back the charges on your credit card.
Budget Your Money
It’s important to have a written plan of your monthly finances. List your exact budget for the entire month and your expenses. Compare the results and you’ll see how you’ve been managing your money in the past. Are your expenses way more than the money you really have? This will be your reality check on how much you’ve been actually charging on you credit card. So what will you do about it?
From now on, you should have a monthly plan where you will list your allowance for the month and all the things that you need to buy. Your expenses should always be less than your monthly allowance. Try to save a portion from your budget which you can keep as your personal emergency fund. This will be the money you will spend on situations when you really need the money urgently. Also, save another portion from your budget which you can spend on perks and personal indulgence. Always take a look at your monthly plan and make sure that you’re not spending out of your limit.
Don’t Rely on Others for Financial Help
Now that you’re old enough to have your own credit card, be a responsible person. Don’t think that you can always rely on your family or your relatives for financial help in case you get stuck in debt. With this mind set, there’s a big tendency that you won’t be taking your finances seriously. As early as now, practice independence. Knowing that you are solely responsible for the debts you owe will keep you aware about your spending habits.
Credit cards for students do not have to be such a bad thing. However, if you notice that you are having problems in keeping up with your balances, then it’s time to change. Consider the above suggestions carefully. They are the key to managing your finances.
Avoid Student Credit Card Debt
Students are prone to acquiring credit card debt. Why? Because most young people do not know or are not paying attention on how to handle their credit cards correctly. Here are some practical advice on the proper use of student credit cards and how to avoid credit card debt.
It’s Just a Marketing Strategy
Be aware that credit card companies are experts when it comes to marketing their business. They spend millions of dollars in using different marketing strategies to get your attention, to grab your interest and move you to sign up with their company. Credit card companies may give away freebies, offer instant approval, and other promotional tactics which can be very hard to resist. Don’t be too naïve in applying for a credit card just so you can get a free coffee mug or t-shirt. Remember, there’s more to it than just the freebie.
Don’t Settle for High Rates
There are so many different credit card companies that are competing in the market today that students don’t have to settle for a credit card with unsatisfactory features. Some credit card companies charge high rates for students because they haven’t yet established their own credit. However, there are still other credit card issuers who offer reasonable rates even for students like you. Don’t rush in signing up that application as if there’s no tomorrow. Take your time in choosing the right student credit card with the most reasonable rates. Compare the rates and features that each credit card provides. Only then can you be sure that you’ve chosen the right one.
Control the Use of Your Credit Card
Don’t use your credit card on all your spending needs. For instance, if you’re going to eat in a restaurant or watch a movie be sure you have the budget to spend on it. Don’t use your student credit card on such expenses. If you’ll get into the habit of charging all your expenses on your credit card, it is not unlikely that you will soon be facing credit card debt. Because credit cards are so convenient to use, you won’t immediately realize that you’re already spending way out of your means. In the end, you’ll have a very hard time paying off your balances.
Educate Yourself
You can find valuable articles on the internet that are related to credit cards and credit card management. Learn about the features of a credit card, know your rights and your responsibilities as a credit card holder, know what a credit report is, how your credit report can affect you and read advises on how you can manage your finances correctly.
Student Credit Card Mistakes
Students are prone to get caught in credit card debt. Let’s take a closer look at the following mistakes that students make with their student credit cards.
Signing up for the first student credit card offer
As you enter college, you might receive a lot of credit card offers from different credit card issuers. If you’re not going to think about it carefully, you might just sign up for the first offer that you think sounds good enough for a credit card. It’s easy to get one enticed by a credit card offer. Most credit card companies make a lot of exciting promotions that may be hard to resist. However, if you’ll read the complete terms and conditions, you might be surprised to see that there are certain charges that are higher than expected.
To Sign or Not to Sign
To avoid signing up for the wrong credit card offer, don’t just read the best features of the credit card. Take the time to read the terms and conditions which can be found in the credit card’s website. This way, you’ll get to know about all the rates and charges that come with your credit card. Check out websites that give credit card reviews on different credit cards for students. These websites compile all possible student credit cards in the market, along with their main features in just one page. This will help you see what choices you have and compare them.
In addition, since this is your first time applying for a credit card, it will be better if you seek advice from your family or relatives who may know more about credit cards than you do. Better, you may seek assistance from a financial consultant who can give you an objective and informed opinion about the best student credit card.
Using up all your credit limit
Students are usually given a huge credit limit. But this does not mean that you can spend credit limit to the fullest. Bear in mind that you should keep your balances below 50% of your credit limit. Using up your entire credit limit on expenses has a negative impact on your credit report. Also, you’ll more likely have a hard time paying off your balances in time if you get in the habit of spending your credit limit to the maximum. This brings us to the next biggest mistake that students commit.
Not paying on time
The biggest mistake you can do on your student credit card is not paying your balances on time or skipping on your payments. Credit card companies can increase the rate of your APR, charge you with penalty fees and even take back your rewards and privileges. Worse, you might not be able to keep up with your credit. Incurred monthly balances are the most common cause why students get swamped with credit card debt.
Remember that owning a student credit card is your first step in establishing your credit history. You want to make a good credit report for yourself especially because an excellent credit status will be an enormous help for you when you finish college and enter the corporate world. So take your responsibilities on your student credit card seriously and avoid committing these mistakes.
