TomorrowMakers

Many of us often find ourselves trapped in credit card debt, leading to increased debt, higher interest rates, and damage to our credit scores. Let’s address these seven credit card mistakes to avoid.

Highlights -

• Avoid minimum payments to break free from the debt cycle faster.

• Avoid missing payments to protect your credit score and avoid late fees.

• Don’t spend using your credit cards while in debt.

• Understand APR and fees to avoid unexpected charges.

1. Carrying a balance month-to-month

One prevalent myth is that carrying a balance boosts your credit score. However, it's the opposite! Carrying a balance increases your credit utilisation rate, hurting your score. Aim to keep your utilisation rate low.

2. Making only minimum payments

One of the most common credit card mistakes is paying just the minimum amount due. It may seem manageable, but it leads to more debt in the long run. Minimum payments mainly cover interest, prolonging the time it takes to pay off the principal.

Strive to pay more than the minimum to reduce your debt faster.

3. Missing payments

Missing credit card payments is a slippery slope. It incurs late fees, raises interest rates, and negatively impacts your credit score. Set up auto-pay or set reminders to dodge missing payments.

4. Continuing to spend using your credit card

Using your credit card while in debt compounds the problem. Resist the temptation to make more purchases and focus on paying off what you owe.

Also Read - How To Increase Your Credit Score From 500 To 700 in 30 Days? Top 7 Tips In 2023.

5. Ignoring monitoring your credit card statements

Regularly review your credit card statements to track spending, identify errors, and stay informed about interest rates and fees. Being proactive in reviewing charges can help you detect fraud early.

6. Not knowing your APR (Annual Percentage rate) and applicable fees

Understand the terms, interest rate and fees associated with your credit card. Know your purchase APR, balance transfer APR, penalty APR, and other charges. Being aware will help you make informed decisions.

7. Closing a credit card

Closing a credit card can negatively impact your credit score, especially if it's your oldest card. Consider keeping it open, but if an annual fee outweighs the benefits, evaluate the decision carefully.

How can you avoid credit card debt?

Now that you know about credit card mistakes to avoid, here are some steps to manage credit card debt wisely:

• Create a budget to track income and expenses and allocate more funds for debt repayment.

• Pay off from smallest to largest debt for quicker progress and motivation.

• Seek credit counsellors' help for a repayment plan and support.

Find the latest articles on spending here.

Also Read - International Travel: Top 5 Credit Cards with the Lowest Forex Markup Fees in India 2023