Overspending due to easy credit The biggest mistake you can make as a credit cardholder is using credit as extra money. It is easy to swipe or tap, and this makes one go for impulse buying, which is usually more than one can afford. With time, one ends up incurring unaffordable bills. The solution to escaping this is setting a hard limit on spending in a month based on your earnings and using the card as a means of making payments, not as extra money.
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Paying only the minimum due Most consumers find themselves stuck paying just the minimum statement balance. While this keeps your account in good standing, it allows interest to build rapidly on the outstanding balance. This adds up over time as unaffordable debt. Make every effort to pay the full bill, and if not, curb card usage until payment is made.
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Neglecting interest rates and fees Another mistake is not knowing the true cost of credit. 30–40 percent per annum interest rates make carrying forward balances extremely expensive. Additional late charges and penalty fees increase the cost. To prevent this, cardholders must be aware of their card conditions, monitor carrying balances, and use credit cards for convenience and rewards points only, not for long-term borrowing.
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Having multiple cards without control While having more than a single card may render life more convenient, it also doubles the risk of overspending and failing to pay. Others pile up new cards for rewards but lag behind in remembering the billing cycle. The secret is limiting the number of cards to what you can manage with ease and having a calendar of due dates so that you pay in a timely manner.
Cash withdrawals on credit cards Cash advances on a credit card are among the most costly mistakes. Such transactions accrue interest right away, plus cash advance fees, typically more than for regular purchases. In only the most dire circumstances should cash ever be withdrawn on credit cards. Otherwise, have an emergency fund for unplanned cash spending and use the card only for payments.
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Ignoring credit card statements Most card members do not thoroughly review their monthly statements. This leads to lost mistakes, unauthorized transactions, or spending patterns. Periodic checking of statements enables you to catch unauthorized transactions at an early stage and modify your patterns. Statement monitoring also keeps you accountable to your budget, helping you keep good credit behaviour.
