Credit cards are great – you can take advantage of benefits like travel points, free airport lounge access, cash back, and much more. However, if you use them wrong, you might end up ruining your credit score, or end up in a massive pile of debt. Here are five credit card habits you should break in 2020 in order to have a great financial life:
1) Opening and Closing Credit Cards Frequently
Do you like getting new credit cards for the airline miles or the low interest rate promotions? Many people do this, it is called credit card churning. It is an excellent tactic if you are strategic about it. However, you should be cautious and find as much information as you can. It’s not recommended for people who have bad credit since too many credit card applications can damage your credit even more.
2) Not Reading Your Statements
Being aware of where your money goes is crucial for a healthy financial life. Most people find it tedious or time-consuming, but you should read your credit card statements as soon as they arrive. You might discover unauthorized purchases or mistakes. It’s also a way for you to see which things you can stop buying, or subscriptions you’re not using anymore and save money.
3) Paying Your Bill Late
Blowing off your credit card due date is a dangerous habit. Not only will you have to pay interest fees, which sometimes can be as much as $35 even if you’re only one day late, but it can ruin your credit score. If you simply forget to pay it on time, you can always schedule your payment in advance, and you won’t have to worry about it.
4) Getting Cash Advances
Do you have the habit of taking out cash advances? Sure, they are convenient, but they are one of the most expensive types of credit card transactions you can make. It is estimated that the average interest rate is about 23.68%, and you will start paying interest immediately, with no grace period. Instead of getting cash advances, you should try to build an emergency fund, so that you’re prepared for unexpected expenses.
5) Impulse Purchases
If you frequently buy things you don’t need and regret the purchase later, you’re likely an impulse buyer. This a very dangerous credit card habit since you can’t physically see your money being spent. In case you have this problem, you should start using cash and leave your credit card only for emergencies. You can also tell yourself you will buy the item you think you need tomorrow; there’s a high chance you might not want to purchase it the next day.