9 Credit Card Pitfalls and How to Avoid Them - Page 2

5. Making only the minimum payments

Credit card companies don’t really want you to pay off your balances entirely, so when you make only the minimum payments, you increase the likelihood that you will never pay off your credit card debt.  Those minimum payments are not designed to help you pay off your balance.  They are designed to keep you in debt forever, so always pay as much as you can afford to pay on your card account each month.

6. Not shopping for the best interest rate

There are plenty of credit cards out there, so why should you settle?  If you already have a credit card, consider playing them against their competitors by telling them that you’ve been offered a cheaper rate.  Usually they will lower your rate to match the offer you received.

7. Playing musical chairs with your credit balances

It seems so easy to just keep transferring balances around, especially when one company offers you zero percent interest on balance transfers.  The problem with this “deal” is that you often create more debt than you had before you transferred that balance.  Transferring that balance means that your main credit card is no longer maxed out, so it’s tempting to start using it again.  It will not take long for your credit card debt to double.  Also there are usually fees involved with transferring money around, so be sure to read the fine print before you do anything.

8. Maxing out your credit cards or canceling cards without considering your credit rating

The reason both of these issues are related is because they both affect the amount of available credit you have.  Part of your credit rating is about how much credit you have available to you, and if all you have is one maxed out credit card and another empty one that has just been closed, your rating will drop because you closed the empty card and have no more credit available to you.

9. Ignoring your credit card statements

Those statements are your connection to the company that owns your credit card.  They are free to change anything they want at any time—including raising your rate suddenly.  Of course ignoring your statement has other implications too, like causing you to miss a payment, which is disastrous to your credit rating.

To sum up...

Credit cards are an essential part of your credit portfolio.  You need at least one, although you probably do not need any more than one.  Not using credit cards wisely can lead to a number of costly mistakes that are easily avoided, but when you understand how they work, you will be better able to avoid the major pitfalls associated with this essential line of credit.

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