Credit cards are a great alternative to cash because they’re easier to carry, more secure, and provide an automatic purchase record. Additionally, some credit cards offer perks like rewards points and cash back.
Practicing good credit card habits, like paying your balance in full every month, can also result in zero interest charges and a higher credit score.
However, many consumers struggle to get—and keep—their finances under control. If you’re interested in shifting your behavior, here are some habits to avoid:
1. Only paying the minimum payment—Paying the minimum payment on time may result in no late fee, but you need to take into consideration how much it’s costing you in interest to carry that additional balance for another month—or more.
Instead, try to pay your balance in full. It may be worth going without extras for a month or two if it’s going to help you pay off your debt.
2. Paying for everything with your credit card—It’s dangerous to get in the habit of using your credit card for non-discretionary expenses if you haven’t established a good payoff plan. Otherwise, that $2 carton of eggs could end up costing you close to $20 or more.
You’ve already budgeted for essentials like groceries, utilities, and gas—so using your debit card may make more sense for these items.
3. Overspending to earn more credit card rewards—It’s always great to earn rewards or cash back on things you’re purchasing anyway. Maybe you’ve saved for a new refrigerator. Using your credit card to make the purchase and then using money from your budget to pay it off in full is a great way to maximize your rewards!
However, if you’re not good at managing your budget, consider reducing your spending until you get your debt under control.
4. Cash advances—Ever get those blank checks in the mail from your credit card company? Using these will actually result in a cash advance on your credit card. Unlike regular credit card purchases, cash advances start to accrue interest immediately. They also come with a high-interest rate, no grace period, and additional fees. Send these checks to the shredder!
5. Late payments—In addition to incurring a fee, late payments can also affect your credit score. Set reminders on your phone or computer to keep track of due dates.
6. Not understanding the terms of your agreement—Your terms and conditions agreement contains important information on interest, fees, fraud protection, reward offerings, and redemption. Be sure to review it thoroughly. If you threw it away long ago, you can likely find it on the card issuer’s website.
7. Ignoring your debt—There’s no doubt that debt can create a high level of stress. Instead of pretending the problem doesn’t exist or that it will eventually go away, the best course of action is communication. Call your credit card company and ask for help. They may be willing to reduce your interest rate or set up a payment plan. Don’t let embarrassment keep you from taking action.
Credit cards are valuable financial tools as long as they are used correctly. When it comes to credit card debt, there’s usually no quick fix. Avoiding these mistakes can put you on the path to paying off your debt, improving your credit score, and making your financial situation thrive.