Just because you don’t use your credit card frequently doesn’t mean you don’t have to worry about the common credit card pitfalls. No one can disagree that a credit card offers great convenience. It makes traveling easier, shopping online is just a matter of few clicks, and it is a great help when you run out of cash at the end of the month or when you have to balance your budget. However, a credit card is not without its pitfalls and you can find yourself in one of them in just a few slip-ups. Even the most common credit card pitfalls are avoidable and here’s how you can do so.
Using Credit Card Checks
While these checks are handy and may prompt you to take a vacation or go on a shopping spree, do remember that it’s the equivalent of taking cash in advance. That’s not all; their high interest rates and fees involved as well. You can end up paying a higher interest when you cash that credit card check. You can avoid it by making sure you’re aware of any fees involved when signing the credit card check.
Playing the Reward Game
Many people get credit cards to get cash back or earn rewards and if you’re among them, just make sure you’re conducting annual reviews of your cards and weighing all the risks and rewards. It takes a huge amount of cash and a significant number of points before you can earn anything of value. Make sure you fully understand how much you need to spend to earn gift vouchers, airline tickets or discounts. Is it really worth spending thousand dollars to get $20 back? Think about it.
Maxing Out Cards
Even if your company keeps reminding you that there’s a lot of balance available, make sure you avoid the temptation to use it all up. High balances take the toll on your credit score and higher monthly payments or even a debt consolidation service will also be part of the deal unless you bring the balance down. The rule of the thumb is to keep the balance at 30% or below whenever you can.
Investing in a Card
Many credit cards that offer rewards and benefits come with hefty annual fees, maintenance fees and other surplus charges. Make sure you analyze the deal and don’t fall for a deal that isn’t in your best interest. Using your credit card as a status symbol can do damage to your credit score.
Missing Due Payments
This is a very easy trap to fall into as you always think you don’t have a problem paying some late fees, but it can cost you more than just that. Your interest rate can double if you end up missing multiple payments. Late fees are imposed as a percentage of the total balance, which means you could end up paying hundreds of dollars in late fees. Subscribe to email or text alerts to remember the payment dates and clear your dues on time.