Credit Card Mistakes – How Bad Are Yours? (Part 1 of 3)

October 29, 2009

Credit Basics

Credit Card Mistakes  – Grade yours on a 10-point scale.

Credit card and debt consolidation tipsNobody’s perfect. When it comes to our financial lives, we’ve all done things we later regretted — whether it’s getting slapped with a $3 fee for using an out-of-network ATM or going on a Las Vegas bender and losing the house on an overly aggressive poker bet.

The key is to understand the scale of the transgression. With credit card mistakes and blunders, that’s no easy task — is it worse to take a cash advance or to pay a bill a day or two late? Experts graded a range of credit card mistakes on a scale from 1 (losing a few bucks to a cash machine) to 10 (losing the house). Find out which worry the pros most — and which may (almost) get a free pass.

1) Paying Late
How bad is it? 6
The details:
Credit card companies are notoriously prickly about late payments — even a payment that’s late by a few minutes can pile up fees, interest charges and other Credit card and debt consolidation tipspenalties. Depending on how late the payment is, your card issuer may also report the problem to any of the credit bureaus, which can wreak havoc on your credit score. The good news, says Stacy Francis, president of Francis Financial, is that the error may be reversible. “You do have the option of giving the credit card company a call and asking them not to report it,” she says. “If you’ve generally been an on-time payer, they may waive the fees and not report it.”

2) Paying Only the Minimum on Your Credit Card
How bad is it? 4
The details:
Credit card companies love it when you pay off your debt slowly, but you should loathe it. It won’t necessarily affect your credit score, but that doesn’t mean it’s a good practice. Sending in only the minimum payment “is definitely going to keep you in debt longer, and you’re going to pay a heck of a lot more in interest,” says Francis. “You may be paying twice as much — or more — as you would by paying in cash.”

3) Buying On a Card Just For Rewards
How bad is it? 1
The details:
If you’re paying off your balance on time and in full, using your cards to grab extra rewards isn’t necessarily a bad plan, says Gail Cunningham, spokeswoman for Credit card and debt consolidation tipsthe National Foundation for Credit Counseling. “You can win the rewards card game if you know how to play,” she says. “But you do have to know yourself.” Because most people spend more when they’re paying with plastic than with cash, be cautious and recognize when you’re buying something only because plastic makes the purchase painless.

by Erin Peterson

For credit card mistakes 4-7, please see tomorrow’s post…

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