A credit card is a great way to pay for transactions, create an emergency fund, and even increase your credit score. However, many people get a credit card and then soon find themselves in trouble. Their monthly payments are far more than they can afford, and their balance is much too high. People find themselves in these situations before they know it and do not understand how it happened. To avoid finding yourself in these situations, it is important to understand the most common mistakes people make with their credit cards.
Only Making the Minimum Payments
It can be shocking to receive your monthly credit card statement and see that big balance at the top. What a relief it is then to see that much smaller amount below that big number. This is the minimum monthly payment you must make. If you only pay that, your credit score will not be affected because you are technically not behind on payments. However, you should always pay more than this smaller amount. If you do not, the credit card company will charge you more interest because you will still have a large balance on your card. This means it will take much longer to pay off your credit card and you will end up paying far more on your debt than you should.
Making Late Payments
The date your credit card payment is due is a very important one. If you make even one late payment, it will negatively affect your credit score. The credit card company will report the late payment to the credit reporting bureaus, such as Equifax and TransUnion. This will make it harder to get another credit card or a loan, such as a mortgage. Additionally, if you are more than 60 days late making your credit card payment, the credit card company can increase your interest rate to the highest penalty rate.
Letting Someone Borrow Your Credit Card
Loaning your credit card is one of the biggest mistakes you could make. You cannot control what someone else purchases with your card when you let them borrow it, but you are still responsible for paying all of that money back. Although you may have good intentions and are likely just trying to help someone out, this can get you in a great deal of trouble with debt and so, it is best to make sure you are the only one that uses your card.
Not Opening Your Statement
Too many people throw out their credit card statement without even looking at it. This, however, is a big mistake. If you do not look at your credit card statement, you may not know when your monthly payment is due and end up missing it. This will affect your credit score, increase your interest, and could even cause you to max out your credit card. Regularly checking your credit card statement is also the best way to spot fraudulent activity right away and report it to the credit card company so you are not responsible for the debt.
Allowing Your Credit Card to Get Charged Off
When your credit card is charged off, it means the credit card company has sold it to a debt collector for a very small amount. They then write off the remaining debt. This is one of the worst things that could happen with your account. A charge-off will remain on your credit report for seven years, which will make it more difficult to obtain another credit card or loan in the future. You must miss making your payments for six months before your account is charged off, so always try to pay off any delinquencies before it gets to that point.
Not Reporting a Lost or Stolen Card
After losing your credit card or having it stolen, you must report it to the credit card company as soon as you realize it. If you do not, a thief will have even more time to rack up charges on your card, which you will be liable for paying.
Maxing Out Your Credit Limit
Maxing out your credit limit comes with many problems. First, it may mean that the credit card company will charge you fees for being over your credit limit, and may even apply a penalty interest rate to your balance. It will also hurt your credit score because a large part of that score is how much credit you have and how much of it you are using. The less you use, the better score you will have.
Canceling Your Credit Card
Sometimes, people cancel their credit cards because they think that is the best way to ensure they do not use any more credit. In some instances, people cancel their credit card because they become frustrated with the credit card company for not negotiating with them, or for other reasons. However, closing your credit card account will hurt your credit score and will not get you anywhere with the credit card company. Always leave your credit card account open and, if you are having trouble paying off the debt, continue to try and negotiate with the credit card company.
Applying for Multiple Credit Cards at One Time
Every time you apply for a credit card, the credit card company will look at your credit score. Each time a lender looks at your credit score, it impacts your credit score slightly. When you apply for many credit cards at the same time and each of those creditors looks at your score, it could significantly impact your credit score. You will also likely be denied most of the cards you applied for. Only apply for one card at a time, and apply only when you need them.
Not Speaking to a Florida Debt Defense Lawyer
If you fail to make multiple payments and do not pay back the creditor in a sufficient period of time, they may file a lawsuit against you. Too many people think there is nothing they can do in this situation and so, they try to go through it alone. This is a mistake. A Fort Lauderdale debt defense lawyer can defend you against the lawsuit and give you the best chance of success.
If you are struggling with credit card debt, or a creditor has already filed a lawsuit against you, it is important that you speak to one of our attorneys at Loan Lawyers today. We have helped thousands of Florida residents with their credit card debt, and we will put that experience to work for you. Call us today at (954) 523-HELP (4357) or contact us online to schedule your free consultation.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.