10 Common Credit Card Mistakes

10 Common Credit Card Mistakes

in no particular order, the following are viewed as being the top 10 common credit card mistakes:

1. applying for a card and limit you cannot afford to repay

most people have bad debt management skills and are swept away with the fact that they have ?x? amount of pounds as their limit. they rarely consider paying the card and have ?maxed? the card out in a few months. they then spend years trying to repay the card!

2. applying for too many cards

not content with having one credit card that has reached its limit, most of us jump at the chance to apply for a new card as soon as it is offered to us. then, having learnt nothing from our previous experience, we rush and buy all the things we couldn?t because we had to save money to repay the first card. suddenly we have twice the trouble!

3. using the cash advance function

at least with purchases made for goods and services we should get around 50 days interest free credit, but with a cash advance we start to pay interest from day 1. using your credit card to cover your day-to-day cash needs is a very costly mistake!

4. only paying the minimum repayment

credit card companies love us and it has to be their favorite of the common credit card mistakes, but with credit card interest rates as high as they are, if you are only making the minimum monthly repayment then you should know it?ll take you years to repay the debt and you?ll have repaid the debt many times over in interest payments!

5. maxing out the card

another common mistake and one that half the country is at fault of is maxing the card out. if you have maxed your credit card out it?s a sure sign that you are living beyond your means, so what hope have you got of repaying the debt without a radical overhaul of your debt management skills!

6. late payments

late payments subject you to extortionate interest rates and set fees, very profitable for the credit card company and a very unfortunate mistake for you to be making!

7. not checking your statement

a common error when we start to feel the pressure of a debt burden is to start to ignore the fact that the debt exists in the first place. if this happens, the chances are the fees and charges will start to accrue and the next thing you know you are not making the minimum repayments. suddenly you are the subject of more fees and charges. and so the cycle goes on!

8. adding a secondary user

although some may not consider this a mistake, if you add a secondary user to your credit card account you?ve suddenly lost control over the spending on your card ? no matter who the person is. now bills can rack up on your account without your normal controlling self, as they are being transacted by a third party (who you authorise). a credit card company?s dream.

9. using your card overseas

for every overseas purchase you make you could be subject to fee and a lousy exchange rate. so, even if you are the perfect credit card customer and pay your bill in full and on time, suddenly the card issuer is making money out of you!

10. not reading the credit card agreement

in your haste to get a credit card you have not read the terms and conditions of the agreement and so you are not aware that if you act in a certain way or do something you should not, then you are likely to be paying for it. but the real reason why this is on of the common credit card mistakes that issuers love to see is because if you don?t read the agreement carefully they can charge you for additionals you may have been able to opt out of ? such as credit card insurance (a big earner for card issuers!).

joseph kenny is the webmaster of the credit card comparison sites http://www.freeroller.net/mbs.cgi/mb780265 (us) and http://www.creditcards121.com/ (uk). these sites are updated regularly with news and advice regarding proper credit card use.

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Establishing Credit

establishing credit is very important. whether you have previously had a good credit standing and lost it, or you are just beginning to accumulate credit and establish a credit rating, a few standard concepts will help you establish a good credit rating.

the principle way that a lending agency obtains information about your credit history is through one of the credit bureaus. there are three nationwide credit reporting agencies in the united states that handle this, and they are equifax, experian, or transunion. these agencies collect your financial information from anywhere that you have developed a payment history. when purchasing anything on payments, these three credit reporting agencies keep a permanent record.

when borrowing money and establishing credit, you must be able to prove to the lender these four things:

1) stability - you must prove that you can hold a steady job with a dependable income and that you have lived in the same place for a certain length of time.

2) ability to repay - you must be able to demonstrate that your income exceeds your expenses.

3) assets - lenders will look more favorably on your application for credit if you have assets such as a home, car or savings account that can serve as collateral.

4) credit references - lenders will look to see that you have credit references and a good credit standing!

these four principles will help you establish good credit history, and from this, a credit score, to evaluate your availability to repay.

to maintain a good credit standing all purchases bought on time must continue to be handled in a timely fashion. to be responsible in your payments, you will need to prepare a budget from year to year to keep your finances on track; there is no way around it! obviously you cannot spend what you do not make, so the easiest way to prepare your budget is to list exactly what is coming into your household and where that money is going.

make two columns on a piece of paper. title one side inflow and the other side, outgo. under the heading inflow, list all the finances that come into your household including paychecks from employment, part time jobs, side jobs, alimony, child support, everything. on the other side, make a list of your expenditures, and be as thorough as possible. list rent or mortgage, utilities, food, gas, clothing, credit cards, loans until you have created a list of everything that is spent in a month.

when you total each side, the inflow should be larger than the outflow. if it is not, then you will have to make some adjustments. it will have to come back into line because you cannot continue spending more than you are making!

once you accomplish the budget and determine the financial level that you can maintain, when you make more money - you can make more purchases. if you overextend yourself for a temporary purchase, you run the risk of ruining your permanent credit history that you?ve been working so hard on. think before you spend, and save your credit cards for emergencies by paying the entire balance each month. a good credit score is worth its weight in gold in today?s society where everything is bought on credit or credit cards.

greg aldrich helps match consumers to the appropriate credit cards. his site, http://www.freeroller.net/messageboard/mbs.cgi/mb10255, allows anyone to compare credit cards sorted by features and apply online.

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Secured Credit Cards

secured credit cards are one of two types of credit cards. there are unsecured credit cards that generally only require your signature and a monthly interest rate, and perhaps an annual fee, and they will offer the consumer a designated line of credit. a secured credit card is much different, but it is an excellent way to create your credit history, or to build it back if, for instance, you have filed for bankruptcy in the past seven years or your credit is not looking so good.

secured credit cards are easy to obtain by the general public because you are securing your line of credit with your own resources, usually with a savings deposit. this deposit will typically range from $500 to $1000, and your credit line with a secured credit card is then a percentage of that deposit, typically 50 to 100 percent. the issuing company will pay interest on your deposit, but in return there are application and processing fees associated with this type of card, sometimes totaling hundreds of dollars. before you apply, be sure to find out what the total fees are and whether they will be refunded if you are denied a card. a secured card requires an annual fee and has a higher interest rate than an unsecured card.

secured cards are usually easier to acquire because you are supplying the capital that you will be charging against, and this is the reason why they work well as a first credit card, or one you will be using to build your credit back up. you supply the capital and for the fees, they will manage your card and account for your transactions in a monthly statement for you.

debit cards are a great example of how the secured credit card works. when you open an account at your neighborhood bank, they issue you checks and a debit card. you are welcome to use the debit card anywhere that credit cards are accepted as long as you have sufficient funds in your bank account. when your balance hits bottom you can no longer use your debit card until you replenish your account. it is this same principle with a secured credit card. as you run down your account you will periodically need to deposit more so you have the funds to make charges. these deposits are made by paying off the balance of the credit card in full each month. if you do not, you may forfeit your deposit and have the right to charge to the card revoked.

the process of a secured credit card is simple, but it is more costly when you include the fees, and for this reason, it is more inconvenient than an unsecured card. so to improve your credit history, keep your card with responsibility especially if you are planning any loans or investments in the future and will need record of good credit payments. of course, keep in mind that the higher your credit score, the better your credit history will be. with a reputation of bad credit, your doors of opportunity will close quickly!

greg aldrich helps match consumers to the appropriate credit cards. his site, http://www.freeroller.net/mbs.cgi/mb151283, allows anyone to compare credit cards sorted by features and apply online.

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