This week we welcome Beverly Harzog, a frequent source of mine when it comes to credit card issues and author of the new book, Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made. She was nice enough to welcome me to her blog last week and I am happy to return the favor. Here she is with five credit card mistakes to avoid:
Credit cards can be a really useful money management tool. If you take time to understand how to use credit wisely, you can even make a profit from your credit cards.
But if you don’t know the rules of the game, you can end up in trouble in no time at all. Here are five credit card blunders that you want to avoid at all costs.
Mistake #1: You open several credit cards at one time. This mistake is often common among those who are new to credit cards. How do I know this? Because I made this exact mistake when I got out of college.
You open the envelope and pull out your first shiny card and see your name on it. It’s a rush! More offers start rolling in and you don’t see why you shouldn’t apply for all of them.
Well, there are plenty of reasons to stop yourself. Each time you apply for a card, the credit card issuer does what’s called a “hard inquiry.” This can knock two to five points off of your FICO score.
Another good reason to say no to multiple cards? When you’re new to credit, you need to gain experience when it comes to managing a credit line. So take your time and build a good credit history slowly.
Mistake #2: You don’t have a budget. One of the biggest contributors to credit card debt is the lack of a budget. Without a spending limit, you could easily charge more with your credit cards that you can cover with your monthly cash flow.
Remember, a good budget isn’t a constraint that ruins your fun. A budget actually puts you in the driver’s seat because you’ll be able to see a clear view of your expenses and cash flow. And most importantly, you’ll have control over how much you spend.
Mistake #3: You don’t track your spending. This is a detail that often falls between the cracks. You might think this will be a pain, but these days, there are so many options and many of them are even fun to use. You can choose from oodles of smart phone apps, free money management software on the Internet, or create your own spreadsheet if you’re tech savvy.
Be sure that you have a limit for the amount you plan to put on each credit card and then stick to the plan. Check your credit card accounts online every week just to make sure you’re on top of everything.
Mistake #4: You don’t pay your bills on time. Make sure you pay not just your credit card bill on time, but all of your bills on time. If you don’t, your credit score will suffer.
A lot of folks don’t know that a bad credit score can increase the rates they pay for health insurance, car insurance, car loans, and more. An excellent credit score actually helps you save money in many areas of you life.
There are a variety of ways to set up reminders, such as text or email alerts. So do what it takes to pay all of your bills on time and protect your score.
Mistake #5: You carry a balance. Sometimes this starts innocently and you think you’ll carry a balance just this once. But then, before you know it, it’s six months later and your balance is getting bigger due to compound interest.
Look, life can get awful messy at times and emergencies happen. But unless you’re in dire straits, make a vow that you won’t carry a balance.
So pay your bill in full during the grace period. For those who don’t know, when you use your card to make a purchase, the grace period is the amount of time you have to pay the bill before interest charges kick in.
About Beverly: Beverly Harzog is the author of Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made. She is a nationally recognized credit card expert, author, and consumer advocate. She’s appeared on Fox News, CNN Newsource, ABC News Now, and top media markets across the country. She is a frequent guest on syndicated radio shows, and her advice appears regularly in print and on major websites, including the Wall Street Journal, The New York Times, USA Today, SmartMoney, Money Magazine, U.S. News & World Report, New York Daily News, Washington Post, MSNMoney.com, CNNMoney.com and more. Beverly runs a popular credit card blog on her website and has coauthored two books, The Complete Idiot’s Guide to Person-to-Person Lending and Simple Numbers, Straight Talk, Big Profits! She lives in Johns Creek, GA.