Making mistakes with your credit card can result in a variety of negative financial effects, some long term. Every year, credit card companies reap billions in fees from consumer’s mistakes with their credit cards. Instead of having to pay these additional costs and pad banker’s paychecks, avoid these mistakes and keep the money in your pocket. Here are some of the biggest mistakes to avoid.
Not Paying More Than The Minimum Amount
Many people do not realize that the minimum amount due for their credit card payment only covers the interest amount and 2 percent of the balance. So making the minimum payment barely puts a dent in bringing down the balance, opening you up to years of paying interest on the debt before it is eliminated. Always aim to pay as much of the balance as you can to get rid of the debt quickly and limit the amount of interest paid.
Making Payments Late
Every time your credit card payment is not received by the due date, you will be charged a hefty fee and your credit score may drop. The late payment fees could be as much as $35 dollars per occurrence, added directly to your account and included in the minimum payment amount on the next statement. Your payment history is about 35 percent of your credit score calculation, so late payments can drop your score by a considerable amount.
Maxing Out Your Credit Card
Using a large portion of your available credit can be as dangerous to your credit score as making late payments. Your credit utilization ratio, the amount of credit you have versus the amount of credit you are using, counts for 30 percent of your credit score calculation. Those who use less than 25 percent of their available credit have higher credit scores and get a lower interest rate for other financial products.
Not Reading The Details
Neglecting to read all of the documentation associated with the credit card account often means that you miss pertinent information that could help you save money or cost you more. The credit card company must provide information about interest rates and fees in a physical document so the application knows exactly what they are being charged for. If the credit card you are considering charges numerous fees for administrative costs, you would be better off applying for a different card.
Not Reviewing Your Statement
The easiest way to discover if your account has been compromised is reviewing your statement each month. During your review, look for any charges that you do not recognize or any single purchases that you were charged multiple times for. The sooner the issues are discovered, the easier it should be to fix the problem and get you your money back.