4 Credit Card Spending Errors You Could Be Making

Americans are experiencing more credit card debt than ever. One study revealed that the total amount of money owed passed the $1 trillion mark in 2018, the highest ever recorded. This troubling report seems to suggest that most Americans are struggling with paying off what they owe and may be overspending. If you find yourself battling this type of debt, it can be helpful to understand what kind of spending errors you might be making and how you can recover.

1. Opening Specialty Cards

It can be tempting to give in to those store credit card offers that offer you cash back, access to special sales, and other perks. However, these cards often come with sky-high interest rates and hefty late fees that can put you in over your head before you know it. The temptation to shop with credit can also cause you to rack up debt and cause you to buy things you might not otherwise.

There are a few ways you can take advantage of specialty store savings without opening a credit card. For example, many stores offer cash coupons that you collect for every dollar you spend. These discounts can be considerable if you shop often enough, and when the time comes to spend the coupons, you can do so without feeling guilty about charging your items.

2. Paying Only the Minimum Monthly Balance

Overusing your credit card can result in a large monthly payment you may not be able to handle, so you might be making the minimum monthly charge simply to avoid late fees. While this can help you avoid additional debt, the principal amount on your card will likely remain unchanged. As a result, the debt is never reduced and you continue to struggle.

Readjusting your budget to ensure you can pay more than the minimum each month may help you reduce credit card debt. Consider making sacrifices in other areas, such as cutting back your entertainment budget by watching movies on a streaming service and canceling premium music accounts. While you may feel the crunch for a few months, lowering the principal balance on a few of your cards can be worth it.

3. Opening Cards With Throwaway Rewards

When you get credit card offers in the mail, how closely do you examine the rewards before you apply? If the answer is not very, then you might be opening lines of credit with rewards that will do you little good. For example, if you do not travel often but open a card that rewards you with airline miles, the points will probably go to waste and you might end up being disappointed about the perks you miss out on.

Before you open a card, examine the reward terms carefully. Those that offer cash back for every dollar you spend are popular because you can apply that cash to your payment each month if you wish. This can help you pay well over the minimum monthly payment and lower your principal balance.

4. Making Too Many Credit Inquiries

Applying for multiple credit cards can drastically lower your credit score, especially if you are declined because of late payments or other issues. As such, it is wise to be conservative about applying for credit; financial expert Don Gayhardt recommends reserving such inquiries for emergencies so you can apply for a payday loan without having to be concerned about how it might affect your credit.

Overspending on credit cards and making too many inquiries can have a serious impact on making a large purchase later on, such as a car or a home. If you plan to get a loan for either in the near future, considering using cash as often as possible to avoid harming your credit score.

Credit card debt can spiral out of control if you do not pay careful attention to your spending habits. Conservative spending on a few useful cards can keep your credit score healthy and help you avoid a financial crisis.

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