For most of us who use credit cards, it is evident that, regardless of the convenience and advantages of credit cards, there are some serious shortcomings – or at least such potential problems associated with them. It should also be clear that in our modern consumer-oriented world, it is almost imperative to have at least one credit card. However, many go beyond one, having up to five or six credit cards, and they all have significant balances. The main problem with credit cards is abuse. The consequences of abuse can be severe.
In fact, there are some standard credit card errors that cardholders fall into at one time or another. Depending on the user, mistakes can multiply and become crippling habits that leave you in terrible financial conditions. What are some of these mistakes?
Late payments. Although this should be obvious to avoid, for many cardholders non-payments on time become normal. Late payments not only reduce your credit rating but can also cost you more money, since most issuers charge late fees. Another way to lose money is to increase interest rates.
The minimum payments. Another mistake that cardholders face is simply to stick to the minimum monthly payments. The reason for this is that most of what you pay for a minimum payment are used to pay interest, rather than the principal of the amount of your balance. This means that you will never make a dent in this balance since all your money will be used to pay card interest. You will never terminate your debt paying the minimum payments.
Paying for essentials – it is often difficult to resist using your credit card to go to the grocery store when you are dining in a nice restaurant or paying utility bills, but you really should avoid this trap. Doing this consistently, without imposing restrictions on such expenses, can be a quick way of getting big debts. This may mean that you are trying to live beyond your means and that you need to restore some budgetary restrictions on spending.
Pulse purchases. Closely related to the use of cards for basic items or expenses, they are used too casually and make so-called impulse purchases. This means that you see this, you know that you have funds on your card, and you leave the store with it. All this is done without any thought about the overall consequences for your finances. Many cardholders are caught under the influence of uncontrolled expenses because they disconnect the card balance from interest tied to most purchases. If they used cash (if they had it), rather than a card, they would have saved much more money.
Cash advances and withdrawals – advances and cash withdrawals are not intended to be used as a means of obtaining quick cash when you need it, for example, using an ATM. They should be used only in emergency situations. You will not only pay withdrawal fees at much higher rates than usual, and if you choose a larger amount, this overcharge will become your regular rate until you pay this amount.
These were just some of the common but serious mistakes that credit card users sometimes make. For many of these situations, this is not one misuse that creates a problem; it creates a pattern of misuse that does not require an unnecessary financial burden. Remember this when using your card. Be the responsible user!