They say that to err is human, and it's especially true when it comes to financial matters. The recent survey held among card holders has shown that a vast majority of borrowers have little idea of the changes to their accounts.
It's not news that banks and companies adjust their risks by making changes they deem appropriate. Slashed spending limits and increasing interest rates are just a few of them. Even minor changes can affect you greatly. Learn how to stay on top of your finances by avoiding typical credit mistakes during tough economic times.
Getting close to your spending limits
Bank card applications come with certain spending limits. These limits may be high, low or average depending on your score rating and performance with the company. In the past, a holder with limited history can expect spending limit increases. Today, credit companies increasingly cut credit limits even to their best clients. If you carry a balance that is close to your spending limit, you run the risk to exceed the limit and face serious credit hazards.
Missing your payments
It's one of the biggest and most common mistakes of card holders. You don't have to be an expert to understand how this mistake can affect you. Banks penalize customers with late fees and default interest rates. Think it's no big deal? Have a look at default interest rates that may be as high as 30%. Just imagine how much it could cost you to carry a balance on a card with such a high APR.
Using credit cards at ATMs
Cash advance is an option that allows you to borrow cash against your current balance. It's a very catchy option as there are many costly fees associated with it. When making purchases on a card, we can get a grace period. Not the same thing with cash advances. When using your plastic for cash withdrawals, you will start paying interest from the day one.
Not checking monthly statements
Most customers avoid reading their monthly statements even though they may contain some really important information. Now that issuers change credit terms due to the tough economic situation, you may stay unaware of very important changes. If you don't want to be taken aback, take your time to read monthly statements carefully.
Not reading the terms and conditions
Bank offers are designed to appeal us with tempting rates, zero fees or fantastic rewards schemes. The problem is that people rarely read the fine print and thus don't understand the terms they have agreed to. Before submitting your online application, familiarize yourself with the most important terms and conditions to avoid mistakes in future. If you apply for a rewards credit card, read the terms of the program to make sure you can benefit from it.
In these tough economic times, our financial mistakes and bad payment habits can ruin our budget. That's why it's essential to avoid common credit mistakes and develop good financial habits, like paying on time and reading the fine print of credit agreements.