Over the years, I have seen my fair share of people using credit cards as a way to live when they need extra income, including myself. I discovered the world of credit cards at a young age right after high school. My mom introduced me to them and by the time I was 25 years old I had over 6 credit cards. Yes, 6 credit cards! YIKES!!!! Since then I have paid off most of my credit cards and I will not be looking back anytime soon. While on this journey I learned some very important factors about credit cards and how common mistakes can lead to debt. I pray that my mistakes help others not get into the same credit card spiral I was once in. Below are 3 major mistakes you can avoid that I made early on that cost me thousands.
1. FORGETTING TO PAY YOUR CREDIT CARD BILL
This one is MAJOR! A lot of people forget to pay their credit card bill monthly and that can cause many problems with having the credit card. Paying your credit card late can lead to a late fee charge or even impact your credit score negatively. I actually started setting up little reminders such calendar alerts on my phone to make sure I stay on top of my payments dates. I have also found great rewards in setting up Auto Payment for my credit cards bills. With auto pay, the companies take my payment right out of my bank account a day before or the day the payment is due therefore I am never late on a payment.
2. NOT READING ALL THE TERM AND CONDITIONS
I can’t stress this one enough, please read all the term and conditions. A lot of credit cards have high-interest rates which can hurt a person when trying to pay off a credit card. I remember having a credit card and my interest rate was 17% on a credit card balance of $3,000. At that time, I didn’t know much about interest rate so it “seemed” ok. It was until I actually started to pay the card off that I noticed the problem with that high-interest rate. I was paying around $200.00 a month to pay the credit card down but around $35.00 of that went straight to interest so I was actually only paying around $165.00 toward the principal balance of the card and the other $35.00 went straight to the credit card company for interest. Can you imagine if I was ONLY paying the minimum amount of $50.00 a month how long that would have taken me to pay off that credit card.?!!! Yikes! Speaking of which, that takes me to my next point.
3. PAYING ONLY THE MINIMUM PAYMENT
If you are trying to pay off your credit card and have an interest rate, paying the minimum will make it a little bit more difficult to get ahead. When I just paid the minimum balance it didn’t really move my balances much and I ended using the credit card again because I didn’t see the balance getting lower. Weird, I know. But, a lot of people do this daily. So, if you are trying to pay off a credit card try to go above the minimum payment each month.
Consider the following factors before signing up for a credit card
What is the balance on the card ?
What is the minimum monthly payment requirement on the card ?
What is the interest rate on the card?
What is the late fee amount, if you are late?
If you have a 0% interest rate during a promotion, what will be the interest rate after the promotion is over ?
Think of this as a long-term change, not a short-term solution. Doing so will allow you to pay off your credit card debt and find ultimate financial peace. What tips do you have to avoid credit card debt?
“No discipline seems pleasant at the time, but painful. Later on, however, it produces a harvest of righteousness and peace for those who have been trained by it.”- Hebrew 12:1