Common Mistakes Kredittkort Holders Make

It can be an exciting time to get a new credit card. Maybe you need one for a big trip coming up, have a big purchase, or just need the added security of having one for emergencies. Whatever your reasoning for applying for a new credit card, there are some key things to look out for as a new cardholder.

Using a credit card is a great way to build credit and accrue benefits on your purchases. However, when a credit card is misused, it can lead to unmanageable debt, low credit score, and sometimes bankruptcy. Being diligent about how and when you use your credit card is the best way to protect yourself from financial disaster. Here are a few mistakes to avoid when using your credit card.

Late Payments

The biggest mistake a cardholder can make is to miss a payment or make a late payment. Not only does missing a payment cause your credit score to drop, it can also result in late fees by your credit card company. The majority of credit card companies’ revenue comes from late fees according to this website. Check with your credit card to see if you will have late fees charged. Your credit score won’t be affected until after being late for 30 days, but late fees could be charged right away.

You can avoid late payments by setting up automatic payments each month. Or you can add an alert in your phone to make sure you pay every month. Paying on time every month is the fastest way to build your credit and pay less in fees and interest overall.

Not Paying the Full Balance

It’s a myth that carrying a balance each month will improve your credit score, in fact, the opposite is true. When you pay off your balance each month your credit score will increase. Not only will your credit score increase, but you will save money on interest charges. Getting cashback or points for purchases becomes pointless when you end up paying more in interest charges every month. The benefits you get from purchases on your credit card are typically less than the interest accrued each month. To avoid paying more for the same items, pay off your full balance each month.

Making Minimum Payments

If you can’t afford to pay off the full balance on the card, try to avoid just making the minimum payments. Paying the minimum is better than nothing; but with interest accruing each month you don’t pay off the balance, you could end up paying more in the end. When you need to make a bigger purchase, make sure you pay off as much as you can afford each month.

Maxing Out the Card

Your credit score is affected by how much credit you have, and how much you have used. It is a fine balance to use your line of credit without using all of it. When you max out your credit card you have used all the credit available to you, you are a liability to other lenders. It is important to make purchases using your credit card, but you don’t want to make purchases that get you to or past your credit limit. If you find yourself wanting to make bigger purchases you can ask to increase your credit limit.

Living Outside of Your Means

When you get a credit card, it can be easy to get carried away purchasing things you want. It can become problematic when you see the credit card as extra money. If you make big purchases without a reasonable plan to pay them back, that’s when you could find yourself in financial distress. Use your card to purchase the things you need and want, just make sure you have a plan to pay that back in a month or two.

One of the best ways to build credit with your credit card is to use it like your debit card. When you use your Kredittkortpådagen, such as gas, groceries, and everyday necessities, you can build fast credit. Once you make the purchases you would normally make, transfer the money from your bank account to your card before you forget. This way, you are using the card and getting the benefits, but never letting that money sit in your bank account.

Cash Advances

When you take a cash advance on a credit card, your interest starts accruing immediately. In regular purchases, it accrues monthly, but with a cash advance, it happens right away. If you take a cash advance from your credit card, be ready to pay it back quickly. Some credit cards also charge a cash advance fee. This can be a costly use of your credit card.

Closing Credit Cards

Your credit score is based on the average amount of time you were able to hold a credit card. If you have multiple credit cards, your longest-held card will be worth the most for your credit score. If you feel like it is time to close a credit card, make sure you close the most recent one.

Credit cards can be used for many different things, but building credit is one of the most important aspects of it. If you use it correctly and stay diligent with making your payments, you will see your credit score increase. This will help ensure you get the best rates on other lines of credit. Having a high credit score can increase your chances of being approved for bigger loans, such as home loans, car loans, and personal loans. For more information on what not to do, check out www.cnbc.com/select/common-credit-card-mistakes/ Using your credit card correctly is like anything else in life, it is a habit that takes time and dedication. Creating healthy habits with your credit card will help you avoid debt that can cause life-altering financial struggles. These habits should be made daily. By learning the right way to use a credit card, you can be setting yourself up for a better credit score and more financial security for the rest of your life.