Credit cards are a tool. They’re the type of tool that can allow you to travel for free or provide a large amount of cash back.
When used properly, a credit expert can actually make money. A low-income family can use them to lighten their financial burden. A new business owner can get the equipment he needs.
Using them improperly can be a nightmare.
The devil is in the details and today we’re giving you a heads up on 5 huge mistakes you need to avoid if you want to be successful.
From the Credit Expert: Avoid These Mistakes
1. Too Much of a Good Thing
Is a bad, bad thing. It may be tempting to open as many credit card accounts as you can. But don’t.
There are multiple reasons for this:
- You lose track of your spending
- Each account opening could dent your credit score
- It will be hard to take advantage of rewards
If you’re new to the credit card hustle, start with one card. In six months, if you feel you can handle another, then ok.
2. Not Paying the Balance Every Month
Credit cards are a form of revolving credit. If you do not pay your balance in full every billing cycle, the charges you’ve accumulated revolve to the next billing cycle. In return for allowing you to do this, you are charged interest on the balance.
If you’re looking to utilize an excellent cash back or rewards program, not paying the balance in full every month will nullify any profit you’ve made off of the system.
Furthermore, once you get into this habit, you’re likely to continue until you’ve maxed the cards out. And that monster is a post for another time.
3. Closing the Account
Not using your card? Just close the account, right?
“Absolutely not,” says our credit expert.
If you’re carrying debt and you’re closing cards as you pay them off, you will hurt your credit score. Pay them off and keep them in a drawer or emergency box for safe keeping.
Having to open a new account to replace it will only dent your score even further.
4. Taking Out Cash Advances
Read the fine print. A cash advance is going to carry an interest rate of several points higher than your APR.
Not only that, you’ll be subject to a host of fees and interest begins accruing immediately, not at the end of your billing cycle.
By the time they’re done with you, you’ll be visiting WireLend to take out a loan to pay off your cards.
5. Not Taking Advantage of Services
The credit expert says the biggest mistake you can make is not taking full advantage of the services and perks of your cards. If you open an account that has a sign on bonus, make sure you follow the directions to get your bonus.
Throwing away free money is one of the top ridiculous things that new credit card users do.
Most credit card companies offer a free FICO or Vantage score. Use it.
If you’re new to the game, our credit expert advises you to play it slow and smart. Stay away from cards with annual fees when you’re just getting started.
When used properly, credit cards can be one of your greatest financial assets. Don’t hesitate to use every resource they offer up.
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