New student special: Credit card mistakes you need to avoid

“Nowadays it’s not who wears the pants in the family but who carries the credit cards”

It is unfortunate that so many people get into credit card debt every year. As per the Federal Reserve, US credit card debt has crossed $1 trillion for the first time since the recession. Americans owe $1.0004 trillion on credit cards. This figure is 6.2% higher than the previous year and 0.3% higher than January 2017.

But credit cards have loads of benefits. They come with strong security features. They make it very easy to book hotel rooms and flights. Plus, they offer lots of lucrative reward programs. Yet these benefits are fleeting since too many people are making these 6 mistakes.

1. Paying only the minimum amount: This is the worst mistake credit card holders often make. They’ll pay more interest in the long run. Plus, it will take a long time to pay off their credit card balance.

Let me explain you in details. Your outstanding balance on credit card is $5000 with a 14% APR. The minimum payment formula of the credit card company is 1% of the principal and interest charges per month.

If you pay only the minimum amount, then you’ll pay $5000 in interest. Plus, it will take 18 years to clear the balance.

The best option is to pay off the full balance every month. You got to use the money all month and obtain reward points.

2. Paying a late fee to the credit card company – You know why it is so bad to pay a late credit card fee? It’s because of 2 reasons. First, when you’re paying a late fee, it means you didn’t pay your bill within the deadline. Secondly, you couldn’t convince the credit card company to waive off the fee.

If you talk nicely, many creditors will agree to waive off late fees. You can call your creditor and request to withdraw the late fee. Or, you can simply make your request in the online support window.

Usually, you have to pay $25 for your first offense and $35 for your second offense. The amount is not too big. But if you repeat the mistake every month, then this will drain your budget and increase the revenue of the credit card company.

3. Carrying a huge balance: If you look at the figures closely, then you’ll realize that the interest is too much. Do a few simple calculations. You’re paying $12,761 on $1,000 when the interest rate is 29%. A credit card balance of $2000 means you’ll lose $360 when the interest rate is 18%. Small balance can escalate to a very big amount if you carry a huge balance.

Some people feel that it is enough to make minimum payments every month. They can pay the leftover balance later. But this is a big mistake since they are not thinking about the accruing interest.

The best option is to not carry any balance and pay accruing interest. If you carry a balance on credit card, then it’s better to pay it off as soon as possible. Change your spending habits so that you can pay off the entire balance every month. If you don’t have money, then the best option is to opt for balance transfer credit cards. The interest rate on these credit cards is 0% for almost 18 months.

4. Having a high credit utilization ratio: A high credit utilization ratio is very bad for your credit score. You can calculate it by using a simple formula:

Credit utilization ratio = Outstanding balance / Total credit limit

Creditors consider high credit utilization ratio as a sign of irresponsibility. In fact, this will drop your credit score and affect your loan eligibility later. So keep your credit utilization ratio below 30%. If you need more credit, then apply for another credit card. You can also request the credit card company to raise your credit limit.

5. Closing old credit card accounts: It won’t hurt much if you close a newly opened credit card account. But if you close an old credit card, then your credit score will drop. When you close an account, the available credit line also gets reduced. This, in turn, pulls up your debt-to-available credit ratio.

Don’t close an old credit card account. Keep it for emergencies. Just forget that you have this credit card for the time being.

6. Not checking the credit card bill: Your credit card bill statement contains lots of information. It mentions your due date and any changes to your credit card terms. Apart from that, you can also get an idea about your spending habits. You can find out where you spent more last month and where you need to cut your expenses.

Most importantly, you can know if there has been any fraudulent activity on your account. If charges aren’t accurate, then you can contact the credit card company or you can take legal steps in advance. You won’t be held responsible for payments.

A few words of wisdom

Credit card is devil only when you don’t know how to use it properly. So, before you apply for a credit card, acquire a basic knowledge about it first. Know  why should you use credit cards. Find out which credit cards are easy to get. Understand the basic FICO scoring model and credit reports. And finally, go through the mistakes that you need to avoid to avoid getting into credit card debts.

Author bio: Patricia Sanders is a content contributor at Debt Consolidation Care Community. Playing with words is her passion and reading books to acquire knowledge is her first love. Her articles is a beautiful union of her love and passion.

You can find her articles at and check out her recent updates at

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