Credit cards are one of the most powerful financial instruments in your toolbox; however, they will only work for you if you manage them properly. Numerous individuals unintentionally commit payment errors which negatively impact not only their wallets but also their credit scores. The following are the top mistakes that you should avoid while paying your credit card bill.
Paying the Minimum Due Only
Although the minimum payment allows the account to remain in good standing, most of the money that you will still have to pay will continue to accrue interest. Eventually, this leads to a situation where you are trapped in a debt cycle that is difficult to get out of.
Tip: Make it your primary goal to clear the full statement balance.
Missing Payment Deadlines
An event of just one payment being late even, will have a negative impact on your credit score and your account balance will be charged with fees and penalties. The information about a payment being late by 30 days or more is given to the credit reporting agencies, and it may become part of your credit report for a few years.
Hint: Automate your payments or have alerts set on your mobile device so you are always informed when the due dates approach.
Not Paying Attention to the Credit Utilization Ratio
The most important part of your credit utilization is the percentage of your credit limit that you use, and it has a significant impact on your credit score. If you use most of your credit, it will tell the lenders that you are a financial risk.
Tip: Your utilization rate should remain under 30% of your total credit limit.
Paying Late with Mail or Bank Transfers
Mail or bank transfers of payments are usually slow, and it can take several days to complete the transaction. If you wait until the last moment, it will most likely be a late payment.
Tip: If you are going to use a slow payment method, it is advisable to pay at least 3–5 business days before the due date.
Not Reviewing Statements
Most of the time, mistakes or fraudulent activities in your account may go unnoticed. Neglecting your monthly statement is the same as giving the criminals a free ride by paying for the transactions you did not make.
Tip: Check your statement before making the payment, and if you find any suspicious charge, report it right away.