7 Rookie Credit Card Mistakes You Can Fix Today

Getting a credit card is a rite of passage for every newly minted eighteen-year-olds. It's exciting to suddenly feel responsible enough to hold plastic in your hand that comes in your name. It can also be the start of a slippery slope since new credit card holders often make the mistake of feeling that they are holding free money they can spend and don't necessarily have to pay back. This ends up being a burden heavier than student loans for many to carry.

The general rule is to make sure that you can pay the credit card every month. However, whether due to being a newbie or just having a major bill that you have no other way of paying besides charging it to your credit card, it can be hard to avoid making some rookie mistakes. However, rest assured that if you are patient and focused enough, you can make amends sooner than you think. Read on for more information.

Many people are under the impression that carrying over a high balance month to month is a great way to build credit. Nothing could be further from the truth. In fact, the more you eat up at your credit card limit, the lower your credit score will be since the credit utilization rate is a huge factor. The amount of debt you owe in comparison to your available line of credit is something you need to be aware of - if your debt is higher or equal to your line of credit, devise an action plan to begin paying off your debt straight away.

Having a credit card is essential in helping you to build credit. However, you need to use it wisely. Not taking the time to be aware of how much you can spend each month is a big rookie mistake. You need to budget and plan out your expenses as much as possible; with the advancements of tech, this can be easily done using budgeting software. Otherwise, you run the risk of getting a huge bill on your credit card that can prove detrimental to you in the long run. Fix this by starting to set aside money for fixed bills such as rent, student loans, and so on, while working on establishing an emergency fund in tandem.

It's important to make your credit card payments on time. However, making only the minimum payments is a big mistake. Ideally, you would pay your bill in full, but if that is not possible, then you should pay what you can. Otherwise, you will rack up unnecessary interest charges and it will also take you years to pay off the debt. Try to make a payment plan before making bigger purchases and pay off a good chunk of that whenever you can.

Nothing can impinge on the credit score as much as missing a payment or making one too late. If you are more than a month late, then expect the credit score to decrease by as much as twenty points. This can be avoided entirely by setting up auto payments. After a few months, you'll be able to make up for the mistake and your credit score will be resuscitated.

Opening a credit card blindly without understanding how much the annual fees are is a big mistake. Check how much the annual fees are, the yearly interest rate, what late fees and penalties are, and so on. This can be an easy way to dig yourself into a hole pretty fast without even realizing it. Again, a credit card isn't free money and actually comes with plenty of strings attached, so be well-informed.

Taking a cash advance from your credit card is helpful in an emergency. But, you should never abuse this service. It comes with exorbitant fees, high-interest rates, and is a quick way to dig yourself into a financial hole. Also, they do come with fees besides the interest, so tread carefully.

It's ok to have more than one credit card. However, don't fall into the temptation of applying to too many, or those operated by department stores, for example, just because they simply offer you a discount when you open an account with them. Applying for a new credit card initiates a hard inquiry into your finances, which automatically impacts your credit score. Furthermore, it only encourages you to rack up more debt across different credit lines, which is a terrible habit to have, and it will eventually become a very expensive one.

A credit card is a useful way of making transactions. However, there are quite a few caveats so it is best to be aware of them rather than emptily racking up consumer debt and taking forever to pay it off. You need to focus on your financial health and making sane purchases that are feasible within your budget.