To an experienced user, credit cards can be a blessing. In the hands of a novice, however, it is trouble. While they can be convenient for emergencies and “no-wallet” days, they are also a curse. Young holders tend to be tempted too much that they amount to so much debt.
This is why it is best if rookie card holders either stay out of it or learn to handle the cards better. If they don’t then they could be facing the following perils.
- Paying late
By far one of the worst things that could ever is missing out on deadlines. Payment history is the largest component of a credit score, which is 35 percent to be exact. With that knowledge, no one wants to pay their balance late. Late payments usually mean a lower credit score.
Late payments also result in late payment fees from your bank, which can not only boost your monthly minimum, thus increasing your cost a little more. But all of this depends on upon your agreement.
- Being tempted to overspend
Many studies have shown that people tend to spend more with credit cards than with cash. They are far too tempted to doing so because of its convenience. Some people are willing to spend twice as much the amount for something than when they do it with cards.
You have to set a personal spending limit on your credit card. You have to consider how much you can afford to pay on your credit card each month. Even if it has to be below your credit limit, you will be better off from this.
- Paying only the minimum due
If you think you can get away by simply having the minimum due paid each month, you need to think again. The banks use various formulas to calculate the minimum amount that is due each month. Many of them add in a percentage or two of the outstanding balance and then put in any late payment fees that go over the credit limit. This is why paying the only minimum will only add further interest.
You can find out how much your issuer calculates the minimum by visiting their website. There may also be a calculator which will let you know how much interest you will and interest you will pay.
- Choosing the card for the wrong reasons
Don’t go purchasing a credit card without reading the fine print. Otherwise, you will be missing out on all the rewards programs and a rebate. That is when you are choosing a credit card for the wrong reasons. It would be better to find out which card is best for you and your lifestyle.
Just remember that rebates are important and you have to ensure that you’re getting the best deal possible.
- Loaning your credit card
This is yet another serious problem. When you loan or share your credit card with someone else, you will have no control over the purchases that they will make. You will be the one paying the bill at the end of it. Even if it is your best friend, you should never loan your card unless you are prepared to pay for all the purchases.
- Allowing your card to get a charge-off
We saved the worst for last; credit card charge-off. This is something that will affect your credit report and credit score. The charge-off will remain on your credit report and will affect your ability to get credit cards and loans in the future. If you six months without making a payment, you will get a charge-off.
Now that you know how risky it is to hold a credit card, we surely hope you will act responsibly when you get one.
Katey Martin works as a finance manager for Essay Ace firm. She will always develop and accurate image about the financial environment and devise the necessary solutions for the situation. You can follow her on Facebook | Twitter | Google+ .