This article submission written by Peter Swift covers seven surefire ways to get into credit card trouble.
Could modern society function without credit cards? These seemingly innocuous pieces of plastic have woven themselves into the fabric of day-to-day life. Yet, their accessibility and familiarity can lead to big problems.
If you use credit cards in the wrong way, it is easy to get into serious financial trouble. Here are seven mistakes to avoid if you want to enjoy credit card convenience in safety.
All modern credit cards offer the facility to withdraw cash from an ATM. This can be useful in an emergency, but should never become a habit. The interest charged on the money you withdraw is often two to three times the amount you pay for normal purchases, making this a very expensive way to get your hands on cash.
Borrowing to Live
While credit cards are a convenient way of paying bills of all kinds, you should always repay the total amount you spend on your day-to-day necessities every month when your statement arrives. If you don't, you'll rapidly grow your debt and impact your cost of living.
Using credit to pay off debt is a fast route to financial problems. Unless you're purposefully taking advantage of a 0% introductory period, avoid juggling one credit card against another – or using your card to make other debt payments. This will cause your interest to mount up alarmingly fast and make your debt even more costly to pay off.
This behavior is also an early sign of developing financial problems. I, and you should consider seeking help from a debt adviser before you get any deeper.
Missing your monthly payment altogether is a serious
mistake and something you should avoid. You'll be hit with penalty charged, but
this isn't the worst of it. Missing a payment puts your card issuer on alert
that you're becoming a high-risk customer, and there's a real risk your
interest rate will be hiked in response. If you're already struggling to make
your budget work, this is an extra burden you can do without.
It's important to check your monthly statement carefully, no matter how routine and boring this may be. If you miss any details, such as a payment due date or an increased minimum amount owed, you could wind up being hit with unnecessary charges. Also, checking for unknown transactions can greatly reduce the impact of fraud and identity theft by catching it before wreaks too much havoc.
If you find a charge on your card statement that you didn't make, contact the credit card company right away. The company will investigate the charge and remove it from your obligation to pay.
Frequent Impulse Shopping
While it feels nice to indulge yourself with a shopping purchase every now and then, relying on credit to fund sprees you can't otherwise afford is not a habit to get into.
Paying by credit card feels so easy, but will you feel the same
when your statement arrives and you see how much you owe? Will you wonder and fret about where you are going to get the money to cover the cost? Always take a moment to
think twice before handing your card over at the checkout.
Being Fooled by Rewards
Rewards programs and cash back schemes can be valuable if
they're used correctly. Yet, they shouldn't be taken as an excuse to spend
without careful thought. Racking up a few extra points or an extra half-cent on the
dollar is nowhere near enough to compensate for the interest charged if you
carry over the debt.
There's no doubt credit cards are convenient, and it's hard to imagine
modern financial life without them. However, they can also be a fast route to
money worries, and should always be used with caution and respect.