Debt counselling organisations can help you manage your debt and get back in the black, but it is best never to lose control of it in the first place – although this isn’t always easy to do. Below are five rookie mistakes to avoid making with credit cards.
Remember Who’s Money You’re Spending
Train yourself to think of the purchases you make against your credit card as “Not Your Money”. It is good to remind yourself that you are actually spending money you may not have yet. This is not necessarily a bad thing if you manage your incomings and outgoings well. However, it is important to remember that while credit cards are how just about everything is bought and sold these days, using one still means you are using borrowed money.
Avoid Carrying Debt from Month To Month
Pay your credit card bill down to zero – every time. No exceptions. If you’ve gone a little wild, you may have to pay it in a couple of transactions, but you should still do it. It’s much better than allowing the debt to accumulate and getting hit with the outrageous interest charges for which those little pieces of plastic are famous.
Accumulate Only What You Know You Can Handle
Try not to spend more money on your credit card than you have in savings. If you keep a buffer in your account of about a month’s card bill, you should be able to pay your entire credit card bill off every month, even if something happens to your income for a week or two. If you carry enough in your savings to cover your bill each month, set it up to pay your bill down to zero automatically. This keeps your finances safe from interest charges and late fees – and keeps your credit rating clean.
Pay On Time
It’s obvious, but that doesn’t make it any less important – pay your credit card bill on time, especially if you’re carrying a few large purchases for that month. Did you know that if you pay your card even one day late, all bets are off when it comes to 0% interest rate balance transfer deals? Play it safe and pay on time.
Reject Limit Increases Unless Your Really Need Them
There is no need to tempt yourself unnecessarily. Credit card companies regularly offer credit limit increases to their ‘best customers’. That’s those who make them the most money which means you’re spending a lot, and may be paying high rates of interest. Raising your credit card limit sounds like fun, but the consequences can be disastrous. If you’re headed away on holiday or something and want to raise the limit while you’re travelling, go ahead. Just bring it back down once you get home. You’ll find you don’t need any added incentive to spend more than you do.
Credit cards can seem like the answer to a working professional’s dreams, those on a tight budget, or those with a lot to cover with just one pay check. Credit cards can be a way of making your money stretch that bit further. However, when you’re first starting out as a credit card user avoiding these rookie mistakes is important – they can set you on the road to a stressful debt situation and that’s something you don’t want hanging over you, especially when you’re starting out.
Have you ever made a mistake with your credit cards? How much did it cost you? Would you like to warn other credit card users against doing it?