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Credit Card Mistakes You Could Be Making

If you have submitted a credit application for just about anything, whether it’s for a mortgage, loan, rent, or even some potential employers are reviewing, you know that your credit score is sort of the first impression that you can give about your financial background, next being income of course.  When it comes to interest rates, the higher your credit score, the better the rate, which ultimately saves you the most money every month.  You probably didn’t know that how you handle your credit card has such a huge impact in your credit score, so it’s important to avoid making any credit card mistakes in how you use it so you can maximize your credit score and not overpay on interest every month.

Not Checking Your Credit Report

These days you just never know who access to your information could have so it’s a good idea to at least check a free copy of your credit report at least once a year to make sure that all accounts are up to date, not to mention, accurate.  While your score will not be included with this, the good thing is that you can view your score on your monthly credit card statement so that way you can stay on top of your score each month.  Between leaving your card out too long or having your information compromised from a retailer, you can never be too careful.

Missing the Due Date

One of the largest pieces of your credit score is made up of your payment history, so if you hit thirty days late, that blemish will stay on your credit report for up to seven years.  While even being a day late will not affect your credit, but you may get hit with a late fee or an interest rate spike, so it’s a good idea to schedule your payments in advance on or before the due date, so you don’t forget to make a payment and risk being late and hurting your credit.

Paying Only the Minimum

While paying the minimum will satisfy the account for the month so you don’t fall behind on the payment, it will do little for the principle balance.  Goes without saying but making the largest payment you can afford each month will rid yourself of the balance a lot faster, and paying less interest, than it would if you were only making the minimum and probably could take decades to pay off.  The minimum will probably just barely cover the interest and a few dollars of principle, so when your next statement comes you will notice it hardly put a dent in the balance.

Maxing Out Your Card

Just as important as the payment history is the amount of credit utilization, which means the balance of your card compared to the credit limit.  The higher you are and closer to reaching your limit, the more your score will be impacted.  By paying off the full statement balance every month, you can ensure you keep your balance at a minimum at the start of every month, even if you use for every purchase, and avoid carrying over a balance and paying interest, which can cause a downwards spiral where the end results is most likely being in debt.

Not Taking Advantage of Rewards

It can be argued that credit cards should be used for every purchase, not only because it provided great protection against fraud so you can easily dispute charges without the worry of the money being taken from your account like it would with a debit, but the best part about a credit card are the rewards.  You can earn points or cashback on the purchases you make, so if you don’t have a reward card up to this point, now is the time to get one, otherwise you are leaving free money on the table, even if you factor in the purchases that you are going to make anyways.  Beyond that, you just have to make sure you don’t go above and beyond your budget, because as you start to see the rewards add up, you might want to continue charging, but if you’re unable to pay off the statement balance, the rewards can quickly be erased once you start factoring in how much interest you’re paying.

Closing a Zero Balance Account

If you have found yourself if debt trouble in the past and want to close the account once it’s at zero balance, you can actually find more benefit in keeping the account open but cutting the card so you don’t use it, that way you are keeping that available credit.

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