There are many reasons for having a bad credit history. Sometimes, managing the credit card can become tough, and can lead to an unexpected debt situation. If proper care is taken before applying for the credit card, and making sure not to commit common mistakes can, prevent credit card debts from accumulating.
Firstly, before signing the offer, it is important to read the complete offer carefully. There may be many hidden charges, and clauses present in the terms and conditions, which may not come into immediate notice. This may lead to unexpected charges, and accumulation of high interest rates. Apply for cards that offer the lowest interest rates and easy payment options are the beginning towards a good credit report.
Applying for many cards can lead to unexpected dip in the credit scores. Applying for new credit cards means more risk of debt and many bills to keep track of. Missed payments, delayed payments, and partial payments too can cause credit scores to go low. Having many credit cards is a contributing factor for irregular payments. Having one or two credit cards usually is more than enough, and reduces the number of purchases too.
Applying for credit cards just to take advantage of the introductory offers, will mostly end up in reducing the credit scores considerably. Introductory offers do not last long enough and when the offer is revoked, the purchases made during this period too are charged with higher interest rates. This is the major reason for credit card debt accumulation, and therefore, leads to overspending. Cancelling credit cards, as soon as the introductory offers end, will cause the credit scores to decrease as well. This is due to the fact that cancelling cards will decrease the credit limit, and increase the total debt to credit ratio. This will account for a big percentage of the total credit scores, along with the new credit account.
Credit card offers and reward schemes encourage the credit card owners to spend more than required. Always having an account of how much money is spent will ensure spending only what can be paid for. Controlled spending is the best solution to manage finances and resolve debt. Also, paying off the credit card bills with discipline, before the due date, ensures that the credit score will remain high. Reading the monthly statement is very important to manage expenses well. Sometimes, there may be errors in the entries, which can add up to the total bill amount. Reading the monthly statement will also give a fair knowledge of interest rates charged and all other terms and conditions. It will also have information about the minimum balance due and the last date for payment. Keeping tab on all these aspects will ensure a smooth handling of the credit card account.
Spending only for necessities and diverting the extra money to pay off the debt will ensure faster relief from debt. Learning financial management is important to have a healthy financial record.