The 3 credit card habits you need to break
Show up late. Smack your gum in public. Swear. Yes, we all have bad habits. Sometimes they are just a nuisance to others. Other times, they are a nuisance to our budgets.
For example, consider bad credit card habits. Systematically disadvantageous use of your credit card can easily come back to haunt you, often in the form of fees and interest earned. If the bad habit persists, it can even wreak havoc on your credit score.
What is a bad credit card habit? Well, here are the first three.
1. Using the wrong credit card
These days, with all the lucrative cash back winnings on rewards cards, if you’re not strategic in your spending, you’re throwing money out the window.
For example, if you spend more money on groceries than on any other expense and your credit card doesn’t give you extra points for food, you should probably get a card that Is. The most lucrative grocery cards can give you 5-6% cash back on groceries. Yes – cha Ching. If your card only has a measly 1% or 2% on grocery expenses, maybe it’s time for a better cash back card.
2. Pay only the minimum balance
When you pay only the minimum, you are making minimum progress on your debt. Yes, of course, it’s easier to pay the minimum than it is to figure out how much you can afford to pay. But by paying only the minimum, you accumulate interest, which makes you get out of debt this harder.
If you’re having trouble paying more than the minimum, make a balance transfer. This way, you can put more of your money into equity, helping you get out of debt faster.
3. Buy things you can’t afford
A credit card allows you to borrow money. But it doesn’t help if you borrow too much. Maximizing your credit cards – without paying them off before the end of the billing period – means you’re going over budget for shopping. Do it too often and you will have a very expensive credit card habit on your hands.
That’s why the safest way to use a credit card is to use it on a budget. Know exactly what and what expenses will go to your credit card (groceries, gas, entertainment) habit, and you’ll be in a better position to say no to things you really can’t afford.
Break your bad credit card habits
Making cash advances, applying for too many credit cards, or not using a credit card you’ve purchased are also bad credit card habits. Ultimately, you know it’s a bad habit if it’s costing you money in fees or interest. Cut these habits and you will free your budget from unnecessary weight.
The post The 3 Credit Card Habits You Need to Break first appeared on The Motley Fool Canada.
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