Bad habits are easy to fall into. A one-time exception becomes part of your routine and before you know it, you’re stuck in a rut that’s next to impossible to break out of.
Bad credit habits can wreak havoc on your credit score, lead you into debt, and cause a number of other financial problems that threaten your stability and long-term goals. Consider your credit habits and if you’re doing any of these, replace it with a better habit right away.
Not reading your credit card statements.
With lots of different bills coming in the mail (or email) every month, reading every single one of them can be mind-numbingly boring, not to mention time-consuming. But, there are benefits to reading your credit card statements, like catching unauthorized credit card charges or billing errors.
Making purchases without checking your credit limit or available credit.
Don’t take for granted that your available credit is the same as the last time you checked your credit, especially if you last checked several days or weeks ago. There’s a chance you forgot about some purchases, payment wasn’t applied correctly, or that your credit limit was lowered since you last checked.
Pulling out your credit card instead of your debit card.
Unless you’re using your credit card to rack up rewards and you pay off your credit card balance every month, you shouldn’t opt to use your credit card over your debit card. Your debit card is your direct access to the funds you should use for everyday purchases, like groceries, gas, clothing, and other expenses. If you use your credit card, it should be a conscious decision with a concrete plan for paying off what you’re charging.
- Shopping to Be Happy
Raise your hand if you’ve ever gone on a mood-based spending spree. If you have, you’re not alone. Shopping can actually release endorphins in the brain, similar to other activities such as exercise, sex, and even eating chocolate. Unfortunately, like those three things, spending money in order to feel good can actually become addictive. Shopping to boost your mood creates a link between happiness and buying material goods – and it’s a link that can be seriously hard to break.
- Transferring balances to avoid payments.
Balance transfers promotions are an excellent strategy for paying off a high-interest rate balance. If you’re constantly chasing balance transfer promotions as a way to avoid paying payments on your credit card, you’re engaging in a bad habit that could hurt you in the long run.
- Using Credit Cards for the Points
Not all rewards credit cards are evil. In fact, when used responsibly, some definitely have their place in your wallet. However, there’s a reason credit card companies offer those rewards, and it’s definitely not out of the goodness of their hearts. Rewards encourage you to spend more, plain and simple.
- Letting credit cards go unused.
In a way, not using your credit cards can be just as bad as using them too much. If your credit cards go dormant for too long, many credit scoring formulas disregard them in your credit score. On top of that, your credit card issuer may cancel your credit card after you haven’t used it for several months. Use your credit cards at least once every three to six months to keep them active.
- Paying only the minimum.
It’s so much easier to make the minimum payment than to figure if and how much extra you can afford to put towards your credit card bill. But, when you’re making only the minimum payment, you’re not making much progress toward paying off your credit card bill. And unless you have a very low balance or a 0% interest promotion, you’re probably paying much more in finance charges than you have to.
Send more than the minimum if you can or at the very least, pay the amount required to pay off your balance in 36 months, which is also printed on your billing statement. You’ll save money on interest plus you put yourself closer to having your balance completely paid off.
- Habitually paying your credit card late.
In an age where you can schedule your credit card payments days in advance, there’s really no excuse for habitually late payments. If you’re constantly forgetting to send your credit card payments, then you need a system to get rid of this bad habit and start paying your credit card on time.
Paying on time saves you money in late fees and higher interest rates. Plus, it protects your credit from the effects of late payment.
- Applying for new credit cards you don’t need.
Low-interest rate promotions and sign up bonuses are so inviting. You may sign up for every new promotion that’s offered, even if you already have enough credit cards. It’s a slippery slope. Not only can new credit card applications hurt your credit score, but they can also create an opportunity to get into debt. One month you’re handling your credit cards well and then a few credit cards later, you’re in over your head.
We all have our creature comforts – those habits that, for better or worse, we indulge on a daily basis. However, while a regular morning latte or a new pair of shoes might seem harmless, you’ve got to consider their effect on your bottom line.
DKR GROUP LLC
www.dkrgroupfinancial.com | (770)-578-4165