Over 160 million Americans use credit cards. Unfortunately, most consumers misuse their credit cards, resulting in a national average credit card debt of $15,000 per card-carrying household.
Credit card errors, whether from overuse or misuse, can seriously impact your financial well-being.
Here are five typical credit card mistakes (and how to avoid them):
1. Making merely the bare minimum of monthly payments
Credit cardholders may assume they are staying on top of their obligations by paying the minimum balance on time each month, but this generally implies the account is approaching, if not already at its maximum limit.
2. Attempting to manage out-of-control debts on one’s own
Out-of-control credit card debt, like any other personal catastrophe, should not be tackled alone. Isolating yourself does not solve the problem; rather, it exacerbates it.
Create a debt management plan with a credit counselor or a friend to prioritize and correctly handle needs based on your specific financial profile. A debt management plan, on average, decreases interest losses in half and reduces total monthly payments by 20%.
There are sixty-month repayment plans available, and some may be completed in less time.
3. Increasing consumption solely to increase rewards
Credit card companies excel at tempting customers with an array of benefits and privileges in exchange for swiping their cards. Don’t let the kilometers or points fool you. Is a $10 payment worth the $250 you have to spend at your favorite retailer?
Usually, that’s $250 you wouldn’t have spent otherwise, and now you’re enticed to pay $10 more, sustaining the loop. To be fair, that would be a higher-than-average cash-back rate.