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Your credit card can be a useful tool to help you pay for your everyday purchases and personal expenses, but it can also quickly become your worst enemy if you don’t use it responsibly. When you don’t keep track of how much money you spend on it, how frequently you use it, and what type of purchases you make with it, it’s easy to end up with more debt than you know what to do with and possibly ruined credit in the process. If you don’t want your credit card to lead to financial ruin, avoid these six common mistakes below.

#1: Having too many credit cards

There's No Such Thing As Too Many Credit Cards

Many people assume that having more credit cards will provide them with more financial flexibility. In reality, having too many credit cards can lead to big financial problems. Having a lot of credit cards can make it easy for you to bankrupt yourself. Plus, if you’re not careful, you may end up overspending and racking up a high balance. With the interest on multiple cards, it can quickly add up, which can make it hard to stay on top of your budget.

Some would say too many credit cards can harm your credit score. Having a mix of credit cards is healthy and can show that you have good spending habits, but too many can make you look desperate for new credit. The solution is pretty simple: don’t apply for another card until you’ve paid off one or two of your old ones. You should also consider transferring your balances from multiple high-interest cards to one card with a lower interest rate so that you can pay down that debt faster. And if you decide that it’s best for your situation not to have any more credit cards, then stick with what you already have and use them responsibly.

#2: Not using credit cards responsibly

6 Tips For Using A Credit Card Responsibly - Ride Time

One of the worst things you can do is to start using credit cards without having a plan or a budget. This can easily lead to overspending and racking up large amounts of debt. Another mistake is not taking advantage of rewards points. Many credit cards offer great rewards, such as cash back or travel points, so be sure to use a card that offers a good rewards program. Another common mistake is not paying attention to the interest rate. If you carry a balance on your credit card, you will be charged interest, so be sure to choose a card with a low interest rate. Finally, many people mistakenly believe that they need to keep a high balance on their credit card in order to improve their credit score.

The best strategy is to use your credit card responsibly and pay off your balance each month. This will not only keep you from accumulating interest but will also improve your credit score, which can help when applying for loans or credit cards in the future. If you have a high-interest-rate card, try transferring all of your debt over to a new card with a 0% introductory APR offer. This way, you’ll pay no interest while reducing your overall debt load. Be sure to pick a card that doesn’t charge an annual fee, so you don’t waste money just because you want rewards points. Many cards offer cash back rewards or even airline miles for travel, so be sure to look for those perks as well.

#3: Running up your balances and missing payments

One of the most common credit card mistakes is running up your balances and missing payments. This can lead to financial ruin for two reasons. First, the high interest rates associated with credit cards can quickly add up, leaving you with a large bill that you may not be able to pay off. Second, if you miss a payment, your credit score will take a hit, making it difficult to get approved for new lines of credit in the future. To avoid this, always try to keep your balances low and make your payments on time.

If you miss payments, your credit score will take a hit. Bad credit can make it difficult to get approved for new lines of credit in the future. To avoid missing payments and build a good credit history, pay at least as much as you need to each month and always make your payments on time. Also, try not to carry a large balance on your card—the higher interest rates associated with them can really add up fast. Use our minimum balance calculator below to see just how quickly these balances can grow if you only pay off half of what you owe each month.

#4: Chasing Credit Card Rewards

Taxable-Cash backs or Credit Card Reward Points - From The GENESIS

Unless you’re able to pay off your credit card debt each month, rewards programs can be worthless, because interest on your outstanding balance is often higher than the amount of rewards you receive. For example, some companies offer one point for every dollar you spend, but you usually need to redeem 5,000 points to get a $50 discount on a plane ticket. So, the most you’ll save is $50 at a 2% discount. However, when you are unable to pay off your balance, you will often incur interest charges on the outstanding balance, which can exceed the discount.

If you already know you don’t manage your credit cards well, don’t add more temptation by registering for multiple credit cards, regardless of the bonus. If you have more cards than you can handle, you are more likely to miss a payment deadline. Those sign-up bonuses or rewards can quickly disappear with a few late fees or interest payments.

As soon as you have paid off your debt and know how to avoid new debt, you will be able to use your credit cards more frequently. If you pay your balance in full and on time each month, you have nothing to fear from using credit cards instead of cash, or benefiting from rewards like cash back or frequent flyer miles. Just make sure the purchases you make are within your budget for the month.

#5: Using a Credit Card for Everyday Items

Using a credit card to clear your New Year debt

Don’t fall into the trap of charging non-discretionary expenses, like food, to your credit card unless you have a budget in place and know you can afford to do so without incurring large credit card bills each month. Avoid keeping items like groceries and utility bills on your credit card balance to keep yourself in control of your spending.

Realize that a $3 gallon of milk bought with a credit card and then carried without making monthly payments will eventually turn into a $30 gallon if you don’t pay off the balance. No need to be charged with interest for necessary items when you can purchase them in person using cash, check, or debit card.

#6: Failing to check your monthly statement carefully

How to read your credit card statement carefully?

One of the worst things you can do with your credit card is to neglect checking your monthly statement. This is a huge mistake that can easily lead to financial ruin. By not taking the time to look over your statement, you could be missing important information. For example, you might not realize that you’ve been charged a higher interest rate or that your minimum balance has increased. By failing to check your statement, you’re essentially giving the credit card company free rein to do whatever they want. So, be sure to set aside some time each month to review your statement carefully.

The idea of spending hours going over your credit card statement can be a little bit overwhelming, but it’s definitely worth your time. If you have multiple credit cards, review them all at once and then group them together based on similar information. To make things easier, you can pull out just your most recent statement and focus on that one. Once you’re done with that, take a look at last month’s statement and compare it to what’s listed on your latest bill. This will allow you to catch any mistakes that are quickly corrected before they become big problems. It will also help you find out if there are new fees or account terms that need updating right away.

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