Hey everyone, I’m Joshua Rodriguez and, tank you for coming to read my debut post here at Eyes On The Dollar. I’ve had quite a bit of experience helping consumers with credit card debt so, I figured, I would share some of the fruits of that experience today. Although, I’ve come to learn that everyone is very unique on a financial level. But, I’ve also noticed quite a pattern through many of them. The pattern was, financial hardships were being caused by simple and avoidable mistakes made when using credit cards. So, today, I’m going to tell you a bit about the most common credit card mistakes that you should be sure to avoid.
Mistake #1: Using Credit Cards For Cash Advances
One of the biggest mistakes that I’ve seen a trend forming around is the use of credit cards for cash advances. Unfortunately, most of the people that did this didn’t realize that cash advance balances were charged a much higher interest rate. Another thing most of them didn’t know is that, as they payed minimum payments, those payments were being allocated to the balances at the lowest interest rate. So, the balances at the highest interest rate would sit and fester and build while new balances were being created to be paid off at a standard, lower rate first. After a few years of this trend, the higher interest rate balance would become the vast majority of the thousands of dollars in credit card debt that these consumers had.
There’s Always A Lesson To Be Learned
Well, there are a couple in this case. First off, never, ever, ever, ever use credit cards for cash advances. The simple fact is that the pricing for cash advance transactions is designed to keep you in debt and paying higher rates. Also, you should always pay more than your minimum payment but, this is even more important if you already have a cash balance because if you don’t pay more than your minimum payment, none of the money will ever go to pay your higher interest rate balances.
Mistake #2: Not Thinking About Balances As They Add Up
Another trendy mistake seems to be one of the most easily avoidable. However, I can’t tell you how many times I’ve heard something like “I got the bill each month, paid it, I never thought about how much I had left to pay.”. If you’re not thinking about your debts, there is no way to prioritize them, create a plan to become debt free or even be sure that you are paying a competitive interest rate.
Pay more attention to your debts. Before sliding your credit card, it’s best to think about if you can afford to pay your balance off completely, including new purchases within 3 months. Although, it’s best to pay your balance off every month! Also, if you have outstanding balances that are just impossible to pay off any time soon, keeping track of them will help you slow down the use of your cards and make a plan to pay them off!
Mistake #3: Being Married To A Lender
I’ve talked to people who have had the same Capital One card with 22.99% interest rates, and as the balance grew, they never thought to use a new credit card with lower rates or transfer the entire balance to a 0% promotion in order to make a dent in the debt and pay the rest off at a lower rate. They liked the card and didn’t enjoy change. Because of that, higher than average interest rates and tough economic times led them into a spiral towards financial hardship.
What We Should All Take From This
Once every year or two, it’s best to take a look at your rate and fee structures on your credit card. Once you are sure you know what you’re paying, take a look at the balance transfer credit card market. See if there are any cards that can beat your current fee structure. If there are, call your lender and tell them that you found an offer that is a lower cost, but you don’t want to transfer because you like the card you have. Then, ask them if they would be willing to match the offer. You would be surprised at how many times the answer is “Yes”. If not, strongly consider transferring your current debts to a new card. However, this process is a bit dangerous, so before taking it on, please read my recent post about how to use balance transfer credit cards properly. It’s available here!
Thanks For Reading, I’d Love To Know What You Thought!
Again, thank you for taking the time to read my post. I’d love to answer any questions or concerns or even learn your take on the credit card and credit card debt topics. So, feel free to leave a comment. I promise, I’ll respond! Also, for more fun, financial tips, head over to my blog, CNA Finance.
Kim’s Comments: I’ve certainly been guilty of mistake #2! Getting out of credit card debt can be hard enough without having to pay more interest than necessary. By paying attention, we can make it easier to get out of debt.