Top 5 Credit Card Don’ts
Here’s a list of the top 5 things you should never, ever do when it comes to credit cards.
Avoid these like the plague.
DON’T: Get Cash Advances
Credit card companies will often charge a higher interest rate on cash advances. A cash advance is money taken out through an ATM on your credit card or the use of those very enticing credit card cheques that you often receive in the mail. Plus, there is no grace period on cash advances; the interest starts to pile up as soon as the cash hits your hands.
Cash advances on credit cards are like hot coals – if you touch them, chances are you’ll get burned!
DON’T: Only Pay the Minimum Payment
Credit Card companies are ever so helpful when they tell you what the minimum payment will be for you to avoid any issues with credit agencies. But adhering to this minimum payment could be more harmful than helpful. Pay more than the minimum to decrease your outstanding balance owing quicker.
If you have $1000 owing on a credit card and only pay the minimum amount owing each month, it will take you almost 10 years to pay it off and it will cost you an extra $1,056.70 in interest – yikes!
DON’T: Be Forgetful
If you forget to pay your bill, you’ll get dinged with interest charges. Set up an automated direct debit from your bank account to avoid the consequences of forgetting. Date your payment for a few days before the due date to take into consideration weekend service and holidays.
Or, set up an automatic reminder in your calender a week before your monthly statement is due.
DON’T: Pay Extra Fees
Admin fees can be just as scary as the dentist. You innocently use your card in a way that you think you can and boom – a random admin fee appears on your statement. Be aware of what can trigger a fee so you can avoid it:
Going over your credit limit,
Using a card you’ve not used for over a year
Purchase something overseas
Paying your credit card with a cheque that bounces
Getting a statement reprinted.
DON’T: Have Multiple Cards
Do you really need more than one? Retailers are constantly hawking their cards, offering you 10% off your purchase if you sign up. Well, that 10% is probably only for that first shop. Then what? It’s another card to manage, another annual fee to pay or more junk to fill up your mailbox. If you struggle to control your credit card spending, best stick to just one card with a rate and fee you can deal with.
The average Canadian has 3 Credit Cards in their wallet. Source: FinanceFox.ca