Common Consequences for Misusing Your Credit Card

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Credit cards are one of the most popular methods of payment in the world. Just about anyone can qualify to open up a credit card account. Unfortunately, while many people own a credit card, they do not know how to use one properly, which oftentimes lands them in debt. Many people forget that credit card balances have to be paid back. Failure to understand how credit and credit cards work can often result in massive amounts of debt being racked up without a way to pay it off. Read more in the below topics to avoid landing yourself in credit card debt.

Buying Non-Essentials

The number one way to land yourself in hot water with credit card debt is to buy things you don’t need. Ideally, credit cards should be used just for emergencies and things that cannot be paid off right away. Just because you have a credit card and have always wanted that Star Wars pint glass set does not mean that you should buy things you do not need. The money spent by way of a credit card will have to be paid back at some point.

The main way to avoid non-essential spending is to actually think about how important an item is to your basic everyday life. If you cannot say that you absolutely cannot function without it, chances are good that you do not need it. Another important strategy to employ is to keep track of all of the purchases you make in a week and to see how much money has gone to things you do not need. Seeing firsthand how much money is going toward unnecessary purchases can often make you realize that you need to be a bit more careful with future spending.

Maxing Out Your Credit Cards

There is no rule saying that because you have a $10,000 limit on a credit card that you have to spend all of it. In fact, maxing out your credit cards is perhaps one of the worst things you can do. Credit cards, and balances, often come with interest that makes paying off large sums of money harder. Furthermore, when credit cards are maxed out, your credit score will drop, and the more cards that are maxed out, the lower your credit score will plummet. Good credit scores are crucial when applying for loans, waiving certain deposits and adjusting any payment plans. If too many cards are maxed out and continue to be maxed out, credit card issuers may actually close down accounts.

Another issue with maxing out credit cards is that you may end up with a high Annual Percentage Rate (APR). High annual percentage rates should be avoided at all costs. A higher APR leads to a higher interest rate, which makes paying cards off that much more difficult. If you are maxing out a credit card often, and your issuer hasn’t closed off your account, the company may give you an APR as high as 29 percent interest for a minimum of six months.

Maxing out your credit cards is never recommended for various reasons, but sometimes it is difficult to avoid, especially if you are a student. When you first receive a credit card, be sure to know exactly what your credit limit is and what the interest rate is for that particular card. If you keep the limit in mind, you will know when to stop before the card is maxed out. Another thing to do is to try and keep the amount spent on the card low. Smaller charges are easier to pay off than a large sum with interest. Pay often; even if you are just paying the minimum amount, and be sure to begin paying off the card are soon as possible in order to avoid interest keeping the charge relatively high. Using cash whenever possible is also a good idea, because then there won’t be future charges on the card, driving up the credit card debt.

Minimum Payments, Interest and Paying Late

With all of the talk about credit card debt, increased APRs and possible account closures, you may be wondering if having a credit card is even worth it. Credit cards are a useful tool when you’re strapped for cash and need to make some important purchases, but just as with anything else, you have to be smart about how you use it. Whenever you have to make a large purchase with a credit card, try and start paying it off as soon as possible, even paying more than the minimum (or paying it all off) when finances allow for you to do so.

Another big mistake is to put off making payments on a credit card and end up having to make a late payment. Most credit card companies will forgive a first late payment, but any late payments after that initial incident will incur fees tacked onto the payment due. Also, the longer you wait to make payments on a credit card, the more the interest will build, making it harder to pay off. Always be sure to pay the minimum amount of money, and if you can, make multiple minimum payments to pay the card off as soon as possible.