Credit Management

Common Credit Card Pitfalls

It’s easy to fall into trouble with credit cards. Too often, consumers overspend or don’t keep up with their payments, leading to mounting debt that is difficult to escape.

Beware of the following credit debt traps:

• Not paying your bills on time. Late or missed payments will earn you a hefty late fee and damage your credit score. Pay close attention to the due date listed on your credit card bill and check the small print. Some credit card companies consider a payment late if it’s not in their office by a certain time of day. Understanding what the company means by “late” can help you get your payments in the mail on time.

• Paying less than the minimum. Credit card companies want you to keep a balance on your cards so they can make more money, and paying just the minimum will do exactly that. In the meantime, it may take years for you to ever to pay off the balance and get out of debt.

• Maxing out your cards. Charging up to the limit on your cards can easily get you into trouble if you can’t pay the balance down quickly. An emergency car repair or other unforeseen expense that puts you over your credit card limit may lead to you paying an interest rate and racking up additional fees. Good credit management means keeping an eye on how close you are to your card limit.

• Holding too many accounts. Most consumers have several cards, and it’s easy to open more without thinking much about it. The constant offerings in the mail and at retail stores make every card seem worthwhile. But if you don’t keep track of how many cards you have, you could be opening yourself up to identity theft and uncontrolled spending. Your best bet is to keep only a few accounts open and automatically say no to any other card offers that come your way.

Tips to Improve Your Credit Management Skills

Taking control of your credit is best done through a few proactive steps:

• Start at the beginning. Establish good credit management when you start using credit. It can be difficult to repair your credit score and reign in all those credit card balances later. Keep your credit healthy from the start by only opening up just one or two accounts; making a few small purchases; and paying off the balance right away. This will help you establish a good credit rating and lay the foundation for healthy credit practices that you can follow for years to come.

• Check your credit report. Taking advantage of your free annual credit report is a great way to look at your overall spending and credit history. Seeing everything you owe on one sheet of paper might be just what you need to curb your spending habits and pay off your cards. Unrecognized accounts or balances on unused cards can also tip you off to identity theft, which can ruin your credit and cost you thousands of dollars.

• Get credit help. If you are in over your head with credit card debt, you might need to get help to manage your credit. Many credit card users turn to financial advisors, work with consumer credit counseling services, or use debt consolidation programs. These services can help you understand how to keep your credit in check and assist you with programs to pay off your debt. Some of these services charge a fee, so make sure the cost for getting out of debt won’t put you further in debt.

With a little discipline and patience, credit management is an easy, productive way to achieve financial security.

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