Derby Advisors Shares the Biggest Credit Card Mistakes You’re Probably Making Now
At the epitome of financial flexibility are credit cards, which also promise unmatched privileges and rewards. Some of the creamiest perks and privileges to expect include partial refunds, airline miles, cashback and discounts on select stores. However, credit cards can cause serious financial problems if not used prudently. Poor spending habits rank among the most common credit card mistakes. According to Business Insider, costly spending problems include:
• Running balances on high-interest credit cards
• Foregoing refurbished goods for newer and more expensive items
• Paying gas in full
• Paying full price for everything you buy
• Not using a shopping accountability person
• Impulse shopping
• Spending too much when eating out
If you must carry a credit card, get one that works in your favor. A lot of people are not aware of the benefits and potential dangers of using credit cards. According to USA Today, here are 5 mistakes you should avoid when using a credit card:
1. Failure to have a payoff strategy
The credit card problem is aggravated by people having balances on way too many credit cards. Although most people try to stay current by paying the minimum balance, the struggle to clear off debt is evident. One of the best strategies to clear debt is paying the minimum balance on high-interest credit cards and using cash savings to top the balances.
2. Overlooking the rewards
The perks and rewards included in credit cards can be very enticing. For instance, cash rebates, cash backs and redeemable reward points that can be used to pay for a vacation. To make the most out of your credit cards, you need to learn how to utilize the benefits.
3. Not checking the interest rates
Surveys are increasingly showing most people do not know the interest rates on their credit cards. Considering the interest rates on most credit cards is between 15% to 21% annually, failure to keep tabs with this important piece of information can be very costly. Always make a point of knowing your Approximate Interest Rate (APY) and review the terms year-on-year.
4. Only paying the minimum amount
Although paying the minimum amount due will keep your account in good standing, there is a catch. Making minimum payments can keep you forever in debt, especially if the interest rates are high. This is why it may take you 5 years or more to pay off a $1,500 credit card debt. To stave off possible late payment and high-interest rates simply pay the higher minimum balance.
5. Ignoring the benefits on credit cards
When you apply for any credit card, take the time to read the fine print. Under the user or customer agreement, you will pick important points showing interest rates, fees and the benefits you could be missing out on. Some of the surprising benefits you may find include:
• Extended warranties on purchases
• Insurance on rental cars
• Generous fraud protection
• Theft or damage coverage on assigned purchases
Poor debt management is a costly affair that can cause you untold suffering, from a poor credit to high-interest loans and credit denials. Debt management and financial planning firms like Derby Advisors can help you consolidate and pay off your debts. Derby Advisors houses a team of debt managers with experience in personal finance, debt consolidation, and investment strategies. For assistance, call the toll free number 1 800 207 1756
