Much of the debt problem has its origin in mistakes that are made in the use of credit cards, and many do not take account of them until the debt reaches a stifling and difficult to manage level. That is why it is important to recognize such mistakes in time to avoid falling into a spiral of indebtedness with serious consequences in the future.
Minimum Payment
Least amount is what you pay every month to avoid falling into arrears and be penalized with more charges. This amount varies according to the issuer, but it is only a small percentage of the balance. For example, in many cases, the minimum balance maybe 2% of the total balance. This means that if your balance is $1,000, the minimum payment will be $20.
The problem is that if you just make the payments of a minimum amount, it will take many years to pay the balance, but not only that, you will have paid almost double in interest, since these are accumulated daily. So it is good to try to pay the balance in full every month, and if this is not possible, try to pay an amount that is above the minimum to cancel the debt as soon as possible.
Higher Charges than Payment
If you send payments monthly and you observe that the balance of the debt does not decrease but increases, then there may be a problem of expenses beyond what your income allows you. The situation is complicated if you make minimum payments and continue to spend. For example, you meet the minimum payment of $20, but additional charges for $50. This pattern of payment and spending does nothing but increases the debt, and the best way to avoid it is through a well-planned budget and proper credit monitoring.
Go Over the Limit
The credit card has a credit limit, which is the maximum amount you can charge to the account. However, the bank or card issuer may allow you to exceed the limit, but you will be charged a penalty or fine for it. This can cause your credit score to fall and the interest rate on your account goes up. In addition, the bank will continue to charge a fine each month until the amount exceeded.
Late Payments
Something very frustrating is receiving a penalty for late payment, and worse if they accumulate for several months and you have to pay interest on them as well. There’re several causes why payments may be late, but to avoid this, you can set up an automatic payment method, either for the minimum amount or the entire balance.
The credit card is very useful, but if you do not handle it in a proper way, it can bring you a serious headache. It’s advised to have a credit monitoring service so that you can stay away from any hazards.
