According to CNBC personal finance expert Alexandria White, “A credit card is a great asset, but when you use it incorrectly it can cost you a pretty penny.”
If you want to make sure you’re not making costly mistakes, look out for these common errors:
Mistake 1: Carrying a balance from month to month
Contrary to popular belief, you should NOT carry a small balance every month to improve your credit score. Do this instead: Pay back the whole balance each month, close to your “statement closing date” but before your due date. In this way, you prevent owing interest at ALL on the transactions you make. Speaking of interest …
Mistake 2: Not knowing your interest rate and fees
Do you know how much interest you pay on your balance? How much you’re being charged for holding your card – your annual fee? Or the amount charged if you transfer your balance to a new card – your balance transfer fee?
Not knowing a card’s rates and fees can and likely will cost you dearly in the end. Your ignorance only profits credit lenders, so do you research!
Mistake 3: Closing a credit card
The total age of your open credit accounts is a factor deciding your credit score. Closing accounts shortens that life span, costing you points!
Because of this, letting unused cards lie dormant rather than closing them altogether isn’t a bad thing!