Making some types of mistakes with your credit cards can be costly, in more ways that one. Here are some of the worst things you can do with your plastic:
Paying only the minimum monthly payment each month. Suppose you owe $3,000 on your credit card with an APR – annual percentage rate – of 17 percent. If you pay only the minimum payment each month, it will take you 126 months – that’s 10 and a half years – to pay off your card. And that’s if you don’t charge another penny during that time. Even worse: You’ll pay more than $2,200 in interest charges in addition to the $3,000! Go here to calculate just how long it will take to pay off your credit card balance if you pay only the minimum monthly payment.
Paying your credit card bills late. Making late payments on your credit cards can damage your credit score, which can make it more costly for you to obtain other types of loans and even some types of insurance. You’ll face costly late payment fees from your credit card company, too. Double ouch.
Using all of your available credit. Not only can using up all of your available credit lower your credit score, but you are more likely to accidentally go over your credit limit and pay an over-the-limit credit card fee. Aim for using only as much as one-third to one-half of your credit limit at any given time.
Failing to shop around. Credit card rates and terms vary. A lot. If you carry a balance, your annual percentage rate is important because it impacts how much you’ll pay in financing charges. Credit cards also vary in annual fees – there’s a number that have no annual fee – and in credit card rewards programs. Select the one that is right for you!