U.S. credit-card balances are expected to surpass $1 trillion this year. According to an article in the Wall Street Journal, improving economic conditions have contributed to consumers' increased comfort level with credit card balances. Is that such a great idea? Consumers could be making money mistakes that have a devastating impact on their financial future. Here are a few of the most common mistakes and ways in which you can avoid them.
Paying your credit cards late
Late payments can have a significant negative impact on your credit score. For credit score purposes, late payments are considered to be anything greater than 30 days late. Even one late payment can be detrimental. In addition to hurting your credit score, you may also be subject to additional fees and increased interest rates.
Paying only the minimum balance
Paying only the minimum balance on your credit card balance not only increases the amount of time to pay back your original credit card balance, but also, it can also significantly increase the amount you pay. Credit card companies are now required to report on your statement the amount of time it will take to repay the entire balance on your card by only making minimum payments. It is important to note that this tactic works under the presumption that you do not make any future charges.
Taking a cash advance on your credit card
Taking out a cash advance on your credit card typically subjects you to a higher interest rate than that applied to regular credit charges. Also, interest on cash advances is typically accrued regardless of whether you pay your balance in full each month.
Not paying your balance in full each month
If you chose to use credit cards as your preferred method of making purchases, you should do your best to pay the entire balance owed each month. The interest rates on credit cards tend to be significantly higher than other types of loans.
It's not always easy paying the bills. As you work to secure a stronger financial future, please avoid some of these common credit card mistakes.