Five Common Credit Card Mistakes That May Be Holding You Back

Are you dealing with massive credit card balances? While there is no quick-fix solution to get out of debt, there may be some small changes that you can make in your financial plan to help you balance your finances. Read on to find out if you fall into one of these common situations. They may just be what have been holding you back from achieving your goal of squashing your credit card debt completely.

Situation #1: You pay the minimum every month

You must pay more than the minimum payment every month, as much more as you possibly can. If you owe a credit card company $5,000 at 18 per cent interest and all you do is pay the minimum each month it will take you over 30 years to pay it off, while interest accumulates.

Situation #2: You use your credit card to fund purchases when you’re out of cash

It’s common to think of your credit card as extra cash, partly because it’s so easy to use. We forget that our credit card is very expensive cash. At upwards of 18 per cent interest rate, we may end up paying more money to the bank than for the item we purchased. The next time you’re shopping, whether in town or online, ask yourself how urgent this purchase is. If you can wait, begin a savings plan and work toward saving up enough money to purchase the item.

Situation #3: You have more than one credit card

While extreme credit card debt is not ideal, having one credit card for emergencies can be a great addition to any financial plan. It can be enticing, however, to have two, three or more cards in your wallet. This can be a dangerous thing. Even if the cards have zero balances, multiple credit cards could possibly cause a lender to question what could happen if the account holder gives in to temptation and maxes them out.

Situation #4: You have a credit card for the wrong reason

Some credit cards offer perks, such as a rebate or rewards programme. Excited by these offers, you might be tempted to ignore the fine print. Keep in mind that credit card companies are businesses and their goal is to make money. Be sure to pay off your credit card on a regular basis. Using the card for perks without the means to pay off a purchase is a dangerous habit.

Situation #5: You’re not rate shopping

If you’re paying the highest interest rate available, you may be missing out on the opportunity to save some money by negotiating a lower rate. Give your credit card company a call and negotiate based on your outstanding credit! They will usually be willing to negotiate a lower rate for you.

The key in any plan is staying committed to your financial goals. If you pay off your credit card balance, you can focus on rewarding yourself with things like building an emergency savings fund. When you have the excess cash available, your days of using a credit card as a de facto emergency fund will be over.

DISCLAIMER: The content in this article is for informational purposes only and is not intended to be a substitute for professional medical advice, diagnosis or treatment.