Common Credit Card and Debt Mistakes

Credit cards and loans can be wonderful tools, but they can hurt you if you don’t use them properly. The following are some of the most common mistakes that people make with loans and cards and some tips on how to avoid them:

Maxing Out Credit Cards

One of the top mistakes that people make in the credit world is maxing out the credit cards. It may seem great to have all that available credit, but using it all at once is highly detrimental to the credit score and can knock a person from “good” to “bad” within days. The best rule-of-thumb advice for that is never to spend more than 29 percent of the available balance. That way, you can show use and repayment but not irresponsible behavior.

Only Making Minimum Payments

Paying your credit card bill on time is a great idea, but you need to take it a step further. In other words, only paying the minimum payment won’t put a dent in your debt the way it’s supposed to. It will drag the payment on forever, and it will rack up more interest than you probably want to pay. You can do yourself a huge favor by doubling up every month. You’ll see your credit score rise faster, and you’ll get your debt cleared away.

Choosing Lenders Hastily

You should always research before you choose your lenders. It may be exciting to see that lenders are willing to give you loans, but the wrong loan can set you back for years. You should always research the finance charges, interest rates and the actual company providing the advance check cashing services. That will tell you a lot about whether you should use them or find another option.

Getting Too Many Credit Cards

Using credit cards responsibly includes that way that you handle applying for them. You do need to have at least one credit card so that you can show that you have a revolving account. However, you also need to keep the number of cards that you have down to a minimum of two. Anything more than two is overkill and is likely to confuse you because of the different payment dates.

Not Calculating Income

How much money you actually have is one of those “what to know before borrowing money” things. Many people see appealing deals, and then they jump on them without taking the time to figure out if they can pay them back. Your first step before you apply for any financial product should be sitting down to calculate your disposable income. You can come up with this figure by subtracting your monthly bills from your monthly income. You’ll be able to see physically what you can stand to pay and what won’t work. If you take that one step before you get a deal, you can save yourself a lot of trouble.

Not Considering Other Options

Finally, you should always consider other options before you decide to go into debt. Consider things like family members and friends, church organizations, grants, sales, odd jobs and so forth. Debt should be something that you add to your life only if you’ve exhausted other options, or if you’re trying to restore your credit profile.

The tips mentioned above can help you to manage your money better if you’ve found yourself having debt issues. Everyone makes mistakes. The good news is that there’s always room for improvement in the finance world.


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