6 Easily Made Credit Card Mistakes

6 Easily Made Credit Card Mistakes That Could Land You in Financial Trouble

Credit cards offer unbeatable convenience when it comes to making payments, both online and offline, and for quickly accessing extra funds when you’re short of cash. However, it’s also possible to get into financial difficulty extremely quickly if you use your card in the wrong way. Here are six mistakes to avoid if you want to enjoy your credit card’s convenience without risking its dangers.

Making Late Payments

The cardinal rule of credit card use is to always pay your bill on time. A late payment will result in a costly penalty fee, but the consequences can be much more serious than that. If you regularly make late payments, you may find your credit limit is severely limited, making your card account less useful. Worse, you may find that your account’s APR is hiked upwards, making servicing your debt more costly. Finally, you could find your account frozen entirely, meaning you are unable to use the card in future, while still being fully responsible for clearing any outstanding balance at a punitive interest rate.

Only Making Minimum Payments

Paying on time is only the first step towards safe card use. If you set up an automatic payment for the minimum amount demanded on each statement, you’ll avoid any of the dangers of late payments, but you’ll also wind up paying excessive amounts of interest. With most cards, the minimum payment barely covers the interest charges on the account balance, leaving the principal debt largely intact. The result is that your debt will last almost indefinitely, with nearly all of your repayments swallowed up by interest, month after month. Paying even a little extra whenever you can will shift the balance in your favor, making inroads into your debt as well as covering the interest charges.

Cash Withdrawals

Although using a credit card to withdraw money from an ATM is useful in an emergency, it should definitely not become a regular means of accessing cash. The interest rate charged on cash withdrawals (and credit card ‘convenience’ checks, for that matter) is usually a lot higher than the more attractive headline rate applied to purchases. What’s more, cash withdrawals aren’t always subject to the interest-free grace period that’s standard for purchases, and so even if you clear the debt in full every month, you’ll still have to pay interest on the amount you’ve withdrawn.

Mixing Balance Transfers and Spending

A 0% deal on balance transfers can save you a welcome sum of money if you have a large debt on another card. However, to make the most of this feature, it’s essential to avoid using the same card for purchases. Not only will your monthly payment not be as effective in reducing your debt within the interest-free period, but with many card accounts your least expensive debt is cleared first. This means that all your payments go towards reducing the 0% balance transfer total, while your purchase debt continues to attract full interest month after month.

Impulse Purchases

Sometimes, credit cards make paying for purchases far too simple. Handing over a card or typing your details into a website feels very different from using real money, and it’s easy to buy something on impulse, only to regret the cost when your statement arrives. Avoid temptation by not keeping your card with you at all times, so that using it requires at least a small pause for thought.

Paying for Essentials

Credit of any kind is a poor way of handling life’s essential expenses, and is a clear sign of a broken budget if it becomes a habit. If your credit card has a cash back or rewards feature, then by all means move as much routine spending as possible onto it to take full advantage, but make sure you clear your balance in full every month, or the interest charges will wipe out any gains. Otherwise, consider using a debit or charge card for day-to-day transactions, so there’s no risk of running up a debt.

Credit cards are an undoubted financial success story, with a majority of adults now using them regularly. However, to fully enjoy their benefits, you need to use them wisely, or you may find you’re paying a heavy price for the privilege of plastic.

25 Tips on Credit Card Use for Students

25 Tips on Credit Card Use for Students

First-time credit card owners are often unaware of the dangers of spending beyond their limits. When you spend recklessly and are unable pay back your credit card debt, a long and unpleasant sequence of events unfolds.? In the worst case, the fallout can last for years and adversely impact your credit history and keep you from qualifying for loans and mortgages as well as making any debt more expensive.

The effects of such behavior will be painful over the long term. Loans and mortgages are offered at higher interest rates than others with good credit history can enjoy. Even home owners and utilities may demand a higher security deposit for renting out homes and offering their services because you are now deemed to be less credit worthy thanks to your credit card debt.

That is why it is so important for youngsters to learn how to manage credit cards wisely to avoid these problems.

1. Student credit cards are issued to full-time college students. You can apply for one as soon as you join college.

2. College and university students should apply for cards specifically designed for them. 

BMO SPC®** AIR MILES®†MasterCard

BMO SPC®**CashBack®Mastercard®

SCENE®* VISA* card

Scotiabank

build credit score credit cards

 are a few examples of such student credit cards.

3. As a student, you probably don’t need more than one card. So apply only for as many as you actually need rather than accepting every offer that’s sent to you.

4. Sign the card as soon as your receive it and keep your PIN safe. Change it at the nearest ATM or use phone banking and pick a number that you can remember easily.? Do not write it down on the card or store it anywhere along with it, where others can access and maybe misuse your card.

5. Use your credit card only to make necessary purchases. Stay within your credit limit when shopping and avoid the temptation to add everything you dream about to your card.

6. Use your credit card only to make purchases which you can comfortably afford to pay for using the money in your account.? If you don’t see how you’ll be able to pay for it, don’t buy it with your card!

7. Pay the amount due on your card every month in full.? Doing this will avoid the exorbitant interest charged by providers on outstanding dues.

8. Following these steps consistently will help build your credit history. A good credit history can lead to a better credit score which will help you secure loans and mortgages at attractive rates of interest.

9. Wait until you get a job or other steady source of income before you make big purchases. Your new car can wait until then.

10. Flat owners and utilities charge lower security deposits for people with a good credit history.? Building up that history takes discipline and consistency.

11. Do not carry a balance forward on your credit cards. Pay off all bills in full by the due date.? Leaving unpaid balances on your card is bad for your credit history.

12. The interest rate on credit cards are calculated differently by providers and is based on many factors. Inform yourself about these matters. Some banks charge interest on the whole amount due for the month, even if you have paid a major portion of the balance.

13. Don’t transfer your balance to another account to take advantage of low-interest rates at this stage of your life. Save balance transfer games for later.

14. Don’t jump at every new credit card offer just because you get 100 dollars in free credit or a freebie.

15. It takes time to build a good credit score and credit history. It is determined by many factors like the time-period of your credit history, your loan/credit to bank balance ratio, how promptly you pay your bills, and the types of credit – loans, mortgages, utility bills, credit card bills – that you use.

16. Credit scores of all individuals are maintained by credit rating agencies which supply them to banks and other credit agencies on request.? Make sure that you do everything you can to keep this record spotless and clean.

17. Do not foul up your credit history. It is very difficult and time-consuming to build back credit history once you mess it up.

18. Educate yourself on how credit history and credit scores work. This will help you for the rest of your life. By using this information you will save money in the long run.

19. Keep account details, credit card numbers and PIN numbers along with your bank helpline phone number in a safe location which you can access quickly in case your card is stolen.

20. Check the amount on all transactions before you sign the charge slip and also match it against your monthly statement. Report fraudulent transactions to your card company as soon as you notice them.

21. Cut your expired credit cards into four or more pieces before throwing them away.

22. Do not store your PIN number along with your card.? That way, even if it gets lost, you are at lesser risk of the card being misused.

23.Do not share your credit card PIN number with anyone else.? It is meant to ensure that the card is never used without your permission.? Take advantage of the protection that offers you.

24. Don’t leave your card lying around where others can misuse it.

25. Do not lend your credit card to anyone.? If you must pay for someone else, make the payment yourself instead of handing over your card for them to use.

how to Get Your Credit Cards to Pay You 4 ways

4 Ways to Get Your Credit Cards to Pay You

It is all too easy to spend money on your credit cards – just ask anyone who is struggling with high-interest debt. But there is another side to the credit card dilemma, one that could actually benefit you and improve your finances.

If you take a disciplined approach and keep a careful budget, you can enjoy all the great things credit cards have to offer, all without spending a single penny on interest and late charges. Better yet, you could actually get your credit cards to pay you back. Here are four smart ways to enjoy the convenience of credit card payments without any of the downsides.

#1. Get Free Money with New Card Bonus Offers
The credit card business is more competitive than ever before, so much so that issuers are willing to pay for new cardholders. If you keep your eyes open and do your homework, you can find credit cards with welcome bonuses of $150, $200 and even $500 or more.

Some of these bonus payments take the form of cash or statement credits, while others offer gift cards, merchandise and travel. Just pick the card with the rewards that appeal to you most, read the rules and rack up your bonuses.

#2. Rack Up Extra Interest by Arbitraging Your Spending
When you use your credit card instead of paying cash, you are essentially using the bank’s money to pay for your purchases. Of course, the credit card issuer hopes you will stretch out the payments, and that the interest charges they receive will make up for that initial use.

If you want your credit card to pay you back, you can turn things around by paying your bill in full each month. In the meantime, your bank account continues to accrue interest, money you would have missed out on had you paid cash or used a debit card in the first place.

#3. Reduce Future Spending with Gift Card Purchases
Many of the welcome bonuses referenced earlier require a specific level of spending, often $500 to $1,000 in the first 60 or 90 days. If you put every penny on your credit cards already, you will probably not have much trouble reaching those spending levels, but what if you use your credit cards more sparingly?

If you want to enjoy the welcome bonus and reduce your future spending, you can use your new credit card to buy gift cards. You can then use those gift cards for future purchases, reducing your spending in the process. Buying gift cards for groceries and other staples is a great way to reduce your future expenditures while getting some great rewards.

You can save even more by purchasing those gift cards at resellers, which often discount the cards significantly. Just be sure to check the balances when you receive the cards to make you are getting what was advertised. Even if you only get a 5% discount, that is still extra money in your pocket.

#4. Take a Free Trip with Free Miles
Travel has gotten pretty expensive lately, with high prices for hotel rooms, rental cars and airfare. If you play your cards right, your credit cards can ease the burden of air travel and allow you to get away.

Just about every airline offers an affiliated credit card, and many entice new cardholders with bonus miles. In some cases, those initial bonus offers could give you a free trip. In other cases, you will need to accrue some additional miles. Either way, getting the credit card company to pay for your plane ticket will feel pretty good.

One word of caution here – many of these airline-affiliated credit cards come with hefty annual fees. The good news is that those fees are often waived for the first year, so you can grab that free ticket and cancel the card later.

The overuse of credit cards can be very bad for your finances, with high-interest rates, late payments and other costly gotchas, but it does not have to be that way. If you have a solid budget in place and know how to control your spending, you can grab the goodies from the credit card issuers and actually make money in the process.

Choosing Between Low Interest Rate and Rewards Cards

Your Guide to Choosing Between Low Interest Rate and Rewards Cards 

Today there are many different credit cards available to choose from, so many, in fact, that all the choices can start to make your head spin. No matter which specific cards you are considering, however, one of your most basic decisions is likely going to be between a low interest rate or a rewards card. By understanding the important advantages and disadvantages of each type of card, as well as the differences between the two, you’ll be able to pick the card that best suits your lifestyle.

Low Interest Rate Credit Cards

Low interest rate cards offer lower finance charges on outstanding balances than other credit cards, and they also tend to come with lower minimum payments. Low rate cards, however, do not all work the same way. Some may start with a low introductory interest rate which increases after a certain amount of time, while others remain on a fixed rate. The catch with the fixed rate cards, however, is that after just a single missed payment your interest rate and your minimum payment might both increase substantially.

When You Should Consider a Low Interest Rate Credit Card

There are two main reasons why you may want to consider a low interest rate card. The first is if you often have trouble paying off your balance every month and if you can’t make high minimum payments. Low rate cards are also a good choice if you need to make a very expensive, one-time purchase and will need a while to pay it off. It will allow you to make small, regular payments with little accumulated interest over a period of time.

Rewards Credit Cards

Rewards cards work pretty much exactly as the name would suggest; they offer rewards and incentives for making your purchases with that card. The many different types of available incentives allow you to pick the card that offers rewards which you are actually likely to use. Some typical rewards include cash back, gas cards, retail rewards, gift cards, plane tickets, airline miles, and hotel stays. The tradeoff is that rewards cards usually come with higher fees and higher interest rates.

When You Should Consider a Rewards Credit Card

Rewards cards are the better choice for people who are capable of paying off their balance every month, even if they have to make large, unexpected purchases. For this reason, rewards cards are usually only available to those with fairly good credit scores.

If you are considering getting a rewards card, then it is important that you understand the logistics and finer points of your rewards program, as it may come with certain caps and restrictions that could limit your ability to take advantage of your incentives.

Making an Informed Decision

Taking careful stock of your spending habits and your ability to pay off your balance each month is crucial for picking the right credit card. If you take the time to consider the information presented above before signing up for one, then you’ll be able to take full advantage of the benefits and minimize any of the drawbacks of your chosen card.

How is Your Credit Score Calculated?

Personal Finance: How is Your Credit Score Calculated?

Everyone knows that having a good credit score is extremely important. A good score will make it much easier for you to buy a car, buy a home, and fulfill any other financial dreams you may have. However, many people do not know how their credit score is actually calculated. What are the components that make up your score?

There are many different credit scoring models, but here is a general breakdown of what factors are considered:

Payment History – 35%

Credit agencies consider your payment history to be the most important aspect of your overall score. Here, they are looking at how well you have repaid your student loans, car loans, credit cards, lines of credit, and any other form of credit that you have been given. Late or missed payments may count against your score. They will also take into consideration how late a payment was when deciding what impact it has on your score.

Credit Utilization Percentage – 30%

Under the credit utilization category, agencies are looking at exactly how you are using the credit that has been extended to you. They are looking to see what percentage of your overall available credit are you actually using each month. For example, if you have a credit card with a $10,000 limit, but only have a balance of $1,000 on it, your score here will be great. If, however, you have a balance of $9,000 on that card, your score will take a hit. Generally speaking, you need to be below around 25% utilization to have the best scores.

Length of Credit History – 15%

Lenders value a borrower who has shown that they can manage credit over a long period of time. So, if you just opened your first credit card six months ago, don’t expect to score too highly in this category. Your parents, however, may have been successfully managing their loans and credit cards for over 25 years – they will score very well in this category.

New Credit – 10%

Your credit score will reflect the number of new credit accounts that you have opened (or attempted to open) recently. If credit agencies see that you are applying for a lot of different forms of credit over a short period of time, they may conclude that you are managing your credit badly and will reduce your score as a result.

Types of Credit – 10%

Here, the agencies are simply looking at the different types of credit that you have. If you just have one credit card, you will score badly here. If however, you have a few cards, an auto loan, student loans, and a mortgage, you will score quite highly in this aspect. Greater variation in types of credit is what they want to see.

For those trying to increase their credit score, it is worth studying these categories closely to learn exactly where to focus to achieve the best results. With some patience and planning, you too can have a great score.