In an economy where there is no guarantee of a job, it is up to you to be debt free and enjoy financial freedom. Credit cards are dangerous if you don’t know how to use it. Credit cards have made people go bankrupt. They have made people lose their homes, properties and what not.
Why? Only because CC users were not aware of the mistakes, I call them sins, as they needed to be avoided at any cost. Today, you’ll learn some of the most dangerous mistakes that you must be away from. Read on…
1. Having Too Many Credit Cards
Too many credit cards lead to too much debt. Period. Excess debt lead to mismanagement of credit card which further increases the money you owe to the banks. Before applying for a new credit card, ask yourself – do you need another credit card?
Studies have shown that nearly 85% people do not require another credit card. They do it because they intend to purchase more stuff, goodies for their home.
For those who’re already drowned in debt, it is strongly suggested that they stay away from acquiring more credit cards.
2. Using Credit Cards in the Holiday Season
Holiday season is the season of gifting friends, families. It is these events that make people go berserk and spend more than they can afford. Studies have shown that men and women spend nearly 150% more in holiday season than regular months.
What most people think is – let us spend this holiday season and when it is over, we’ll do overtime and pay-off the bill. While working overtime to earn more is a great sign, spending lavishly before that doesn’t make sense.
What if the income you earned by working over-time goes into your savings? What if you had absolutely no debt post-holiday season? I’m sure it sounds pretty relaxing and convincing.
3. Paying Below the Minimum Amount Required
For most credit card companies, there is no difference between someone who pays minimum amount and someone who pays no amount. The problem is the minimum amount imposed by the CC companies helps them calculate your balance more effectively.
When you pay below the minimum amount required, you hamper your credit card score really badly. It does not even the advancement of delinquency. Plus, the balance can get of our hand pretty easily.
Credit card experts have often suggested that it is better to wait for few days and meet the minimum payment requirement rather than paying less.
4. Falling for Cheap Sign Up Bonuses
Another critical mistake that most people make is they fall for cheap sign-up bonuses. A lot of times, people fall for really pity bonuses like a t-shirt or a $20.00 Wal-Mart voucher. Can you believe it?
In an attempt to get a t-shirt, they sign-up for credit card; this led to further shopping and in short, more debt. The key here is to prioritize your needs and then work towards it.
If you don’t need a credit card, simply you shouldn’t get another one. You can go ahead and purchase not one but 3 T-shirts or spend $100.00 in Wal-Mart from your pocket. Just be wise when it comes to credit card bonuses.
5. Spending All Your Credit Limit
Treat your credit limit as your savings. You don’t need to spend money unnecessarily when you don’t need it. What most credit card users do is – they spend their entire credit limit. It should be treated as your savings; you should have it as a support when you most need it.
Always, always be wise when it comes to using your credit limit. Imagine, you run across an emergency situation and you have no backup to support you? That’s exactly what ‘not spending the whole credit limit can do for you.
Credit cards, if used appropriately, can be a blessing for the needy. But those of you who do not avoid the above mistakes/sins, they can become a curse. Always be sure that you use your CC at right time, right places and right occasions. And, of course, maintain it like a pro. If you don’t, you’re destined to have a gloomy financial life.