They say that half the battle is knowing what NOT to do. If you’re looking to start building up your credit or repair a bad one, responsible use of a credit card with regular purchases and on-time repayments can help improve your credit score. A better credit score will make it easier for you to get accepted for financial products such as mortgages and loans.
Here’s 8 common credit card mistakes to avoid:
- Making late repayments – if you miss a repayment date you’re opening yourself up to late fees and potentially a damaged credit score. You can avoid this by setting up automatic payments or payment reminders through your provider.
- Only making the minimum payment each month – paying the minimum payment means the remainder of your balance is unpaid, collecting interest. You should always plan out how much you’ll be spending on your credit card and paying the full balance off each month.
- Ignoring statements – if you don’t check your credit card statements each month you could be missing important information such as changes to your credit card terms.
- Becoming too dependant – your credit card should ideally only be used for small payments or emergencies. If you find you’re becoming too dependant on your credit card, your balance could reach unmanageable levels and lead you to bigger troubles in the future.
- Exceeding your limit – exceeding your credit card limit puts you at risk for fees, penalties and could affect your credit score. You should always keep an eye on your balance and set up automatic reminders so it doesn’t come as a shock.
- Not knowing the terms – all credit card companies handle circumstances such as late payments differently. Before applying for a credit card or switching to another provider you should fully read the terms and conditions so that nothing comes as a surprise.
- Withdrawing cash – withdrawing cash from your credit card can come with some very steep fees, so it’s always best to avoid this entirely.
- Applying for too many cards at once – if you apply for a number of credit cards at once, this is visible to lenders who may get suspicious and decline you. You should only apply for credit cards one at a time.
You should always remember that using your credit card can be a bit of a double-edged sword. Used correctly, they can help improve your credit score, but used incorrectly they can have the opposite effect.