“Most of us enjoy the privilege of having credit cards to manage our financial transactions. Credit cards provide the convenience of paying for goods and services with just one swipe instead of carrying a hefty amount of cash with us. Therefore, they provide security and convenience. More people are willing to deal with interest rates and some perks just to have these advantages.
Banks introduced the installment plan. The disappearance of cash and the coming of the credit card changed the shape of life in the United States. ~Jerzy Kosinski
With a lot of people having credit cards, one would think that we’re already aware of the limitations and the proper etiquette of handling credit cards. However, that is far from the truth. Unfortunately, there are still some of us who mishandle their credit cards, leading to their own financial distress and eventual bankruptcy.
How do we prevent ourselves from getting debt when it comes to using credit cards? Here are the four mistakes you should avoid when using credit cards.
Not paying in full
Some credit card users don’t want to pay their bills in full because they don’t want to receive loose change (such as pennies). The other possible reason is that they don’t want to drain their accounts. What they don’t realize is that the uncleared arrears will become a burden to them in the long run. Most credit card users overlook that few pennies or centavo, minimalizing the impact they have.
However, remember that that tiny centavo will accumulate together with an interest rate. If you look at it carefully, you’re wasting more dollars than you should.
Being ignorant of the terms and conditions of your credit card provider
Have you seen some scenes either on TV or movies of people’s properties being confiscated due to failure to make credit card payments? Imagine the same happening to you. Not only would it be shocking, but also traumatic to see the properties you’ve worked hard to acquire being taken away from you in a snap. Why is this so?
“Ignorance, the root and stem of all evil.”
It’s because most credit card users don’t bother reading in full the terms and conditions of your credit card provider. Therefore, before you sign on acquiring one, you need to read and understand what you’re getting into. Learn and know what your responsibilities as a user are, and what the providers expect from you. What are your provider’s responsibilities? Everything must be crystal clear before you sign the contract.
Not using your credit card at all
There are some credit card users who won’t use their CC’s at all either because they’re afraid of overspending or paying a hefty amount of bills. While it’s the safest option to avoid the burden of paying bills, it’s not always the case. Why? It’s because you’re better off not getting a credit card at all if you’re not going to use it. What’s the point?
Usually, your credit card provider monitors your credit card activities. If you haven’t used the card for a long time (depending on the terms by your credit card provider), then they will label your account as inactive. They might deactivate your account and you won’t be able to use your credit card at all.
Maximizing your credit limit
Just because you’re given the privilege to spend a hefty amount doesn’t mean that you’re entitled to spend it all. Ask yourself whether you really need to spend $50,000 for just a month? We don’t think so. Therefore, don’t force yourself (or rather, spoil yourself) into impulsive buying and spending. Remember that the amount you spend will have an interest rate.
Using the credit card for cash advance
We don’t recommend this at all. Remember that most cash advances and salary transactions are catered for by debit card, not a credit card. This is a risky move to make because with cash advances, the interest rates are much higher than when purchasing goods and services. So if you don’t want to deal with hefty bills, use your credit card for paying goods and services only.