4 Things People Do Wrong With Their Credit Cards

There is nothing wrong with owning credit cards. Knowing the right way to utilize it can help a user get a good credit score. The situation only worsens if the credit card user does not know their limitations and the scenarios where they can get themselves in worse credit conditions.  

These four signs tell that one has a bad relationship with a credit card and should reconsider having it:

1. Having a balance to pay and only choosing to pay the minimum per month

Paying the minimum amount of a cardholder’s debt per month might feel like an accomplishment for some card owners. Unfortunately, it is not how it always works. Using a credit card for a purchase, in the first place, allows companies to give users more time to pay for the items or services in a larger amount.

Some might think that buying a home appliance on sale using a credit card is wise without knowing that the total amount, in the long run, appears to be costlier than the actual worth of the item. It becomes more apparent, especially when the credit card owner only pays for the minimum amount in five or ten years.

2. Utilizing more than half of the monthly credit limit

Having a $5,000 credit limit and charging $4,500 of it every month is not a good sign even if credit card users pay their expense in full each month. Credit card companies don’t tell everyone about credit utilization. It is the ratio of the outstanding credit card balance to its credit card limit.

Whenever someone charges their card and gets closer to its credit limit, the card algorithm tells the system that the person is a high risk, which can affect their credit scores. To avoid this, one must not consume more than 50 percent of the set credit limit.

3. Having a higher annual fee than the total worth of rewards collected

The rewards program the credit card companies provide should always make sense with the kind of lifestyle the user has; otherwise, it would not be beneficial. Every credit card owner has an annual fee to pay.

Credit card companies set rewards to help cardholders waive this fee to make their product appear advantageous. Sometimes it comes in a specific amount for every particular expense. For example, a user can get $50 for every $5,000 spent on the card. If the annual fee is $100, and the user only spends $3,000 every month, the rewards program won’t help.

4. Co-signing a credit card for someone with bad credit

Being wise with money also means being able to discern whom to trust with personal finances. Several people with a massive amount of debts often have stories of their friend, family, partner, or someone else taking advantage of them, and leaving them to pay the credit card debt. When it comes to money, a limit should be made with every relationship. Just because someone is a friend or a family member does not mean they should be trusted. 

Conclusion

Someone in any of these situations should consider reassessing their financial choices. Credit cardholders should learn how to balance their expenses, credit card charges, and use of their cards. Choosing the right credit card for their lifestyle should also be considered. The earlier a person understands their financial situation and makes a move about it, the quicker they’ll make the necessary adjustments.

In need of personal debt relief? The team at DebtHelpers.ca is always ready to assist. A range of consulting services and debt solutions await every Canadian in need. Contact 905-796-8351 or email support@debthelpers.ca for a free consultation.