Top 10 most common credit card mistakes

Most common credit card mistakesIt can be expensive to make mistakes with your credit card. In a world where every dollar counts, not making the right choices can hit your wallet hard. By far the greatest mistake people make with their credit cards is creating debt that they just can't afford to pay off.

William Blake says on his Web site Canada Financial Guide, "It has become increasingly easy to get yourself into a huge amount of debt quickly." Unfortunately, many credit cardholders don't realize the mistakes they have made until it's too late. Here are 10 most common credit mistakes to avoid at all costs:

1. Using credit card debt management services without having consulted with your credit card company directly. Credit card debt management services will charge for their services and "you will destroy any relationship you once had" with your credit card companies, Blake says.

2. Accepting the terms of a credit card without understanding them first. This is especially true when you make new purchases with a balance transfer card, assuming the low APR balance transfer rate applies to new purchases. Cash advances can be a mistake, too, as the interest rates on advances typically tend to be higher than purchases. Be sure to carefully read the credit card application, or call and ask questions.

3. Ignoring credit card monthly statements. You must read over your statements, checking to see if you were properly billed. Errors do happen, and so does fraud. Keep records of all of your purchases to confirm that your statements are correct. Also check your interest rate to see if it has changed, as well as your credit limit. Going over your credit limit can cost you dearly in fees.

4. Using one credit card to pay off another. This wastes money paying fees and compounds your interest. Once you start down this road, your debt can easily spiral out of control.

5. Not finding the right credit card for you. Take the time to shop around and find the best rate and the best card to suit your needs.

6. Missing payments or sending them late. This is another common mistake that can be expensive and is easily avoided. When you sign up for a credit card, schedule your payments to coincide with the time of month you receive your pay cheque. Mark the calendar so you don't forget.

7. Closing old credit cards. Eventually the good credit rating that you built up with that credit card will be erased from your credit record. Keep it open by making small purchases once a month.

8. Letting someone use your credit card or making purchases for a friend. As much as you might like to help someone out, think of yourself first. If your friend can't pay you back, you will pay for their charges as well as interest on those charges.

9. Having too many credit cards. Every card you sign up for causes a credit inquiry, and frequent credit inquiries will lower your credit rating. It can also be difficult and time consuming to keep track of all your credit cards.

10. Using your credit card online on an unsecured Web site. Make sure the Web sites you purchase from are legitimate and safe. Use an antivirus program on your computer.

Article written by Christopher Ibotrain.

Updated July 10, 2009

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