Credit card provides a lot of conveniences to people. Among the many benefits of owning a card is that a person does not need to always bring cash when buying things and it is possible to purchase items even if the amount of funds available at the time of purchase is insufficient.
Credit cards if used wisely can also open doors to financing opportunities which can allow people to own big ticket items such as cars and homes. A good credit history and credit score is essential if a person is planning to acquire assets that require substantial funding.
Below are five card mistakes that people should steer clear from to help preserve a good credit score:
1) Getting a credit card and buying items without due consideration to budgetary limits. If a person aims to purchase something with a credit card, it is important to have enough money to pay for it when the bill arrives. Cards are excellent financial tools that people can use to build their credit history and establish good credit scores. However, cardholders need to be prudent with their use of their cards so that they could maximize the credit building potential they could generate from them.
2) Using credit cards regularly for necessities. It is not advisable to use one's credit cards frequently to pay for gas, groceries, and other daily expenses. If a person is not able to keep up with credit card bills related to the purchase of necessities, it is best to use cash instead. It is necessary to use a credit card if a person is able to keep track of expenses and make full payments to card bills each and every time.
3) Discarding a credit card after paying off balance. Some financial experts advise people to dispose of cards they rarely use. However, if big purchases are planned to be done this move can be counterproductive as it will lower credit to debt ratio.
4) Not considering processing time when making payments. Many credit card companies do not credit payments immediately on the day they were made. Posting is usually done 24-48 hours after a payment was made. Late payments even if they were not done intentionally, would hurt a credit score.
5) Using credit cards for emergency expenses. Many emergency expenses can cost a bundle and it is possible to be paying off a substantial amount in interest payments when using a credit card. Consider putting away $1,000 as an emergency fund so that there will not be any need to resort to using a credit card.