5 Mistakes You Can’t Afford To Make With a Credit Card

Applying for a new credit is a task not to be taken lightly. With so much competition on the market today, credit card companies are always trying to outdo each other to get a consumer’s business. This can result in a seemingly endless flood of credit card offers and rewards incentives that all looks so good, a consumer can’t help but resist applying for all of them.

Credit histories and scores are the gauge that lets lenders know if you are creditworthy enough to take on financial obligations. If you apply for and use credit cards erroneously, you can be setting yourself up for a lifetime of big debts and bad credit.

Here are 5 mistakes you need to avoid when applying for a new credit card and for dealing with existing cards:

1. Lured By Loot

Credit card offers are often accompanied by an extra that is guaranteed to hook consumers. Free t-shirts, free mugs, free rewards abound among certain card companies who are trying to attract new business. Often found on college campuses, in malls, fairs and other public, well-populated places, credit card kiosks are set up to nab the consumer right away and get them to act fast in applying for a new credit card. The mistake here is consumers don’t look at the big picture and often will sign up for a card just for the free stuff, completely forgetting the meat of the matter. Things that count are the terms and conditions of the card, the APR, and the grace period of the card and these are not looked at closely enough by consumers looking for swag.

2. Missing the Fine Print

Credit card terms and conditions are essentially the contractual obligation a consumer is agreeing to when they sign on for a new credit card. The agreements are generally long and contain an overwhelming amount of information. Consumers often make the mistake in not reading every part of the agreement, including the tiny fine print at the end of the document. By neglecting to review the terms, a consumer doesn’t get a true grasp of the reality of their commitments and often fall into default with payments when they can’t keep up with the rules of card use.

3. Too Much Too Fast

For every credit card application a credit inquiry is born. Whenever a creditor pulls a credit report on a consumer, an impact is felt on the credit score. Too many of these inquiries and a consumers credit score will start dropping. Even if you are not approved for the credit cards, the damage is done when you give the okay to check your credit. Stick with comparison shopping between several cards and only apply for a select few matching your needs.

4. Decisions on Rewards

With so many cards on the market, it can be hard to find which card is right for you. Starting with how you normally live life, you can make a list of attributes a card should have to fit into your lifestyle. The mistake happens when consumers are lured into a promising rewards program for which they have no use. For instance, someone who never travels by airplane would not do well with a airlines rewards credit card. Stick with what you know. Look for cards that make sense for your lifestyle. If there are no fitting rewards programs on the market for you, check into cards that give you straight cash back.

5. Poor Spending Habits

After getting a new credit card, many consumers make the mistake in thinking that their new line of credit is an extension of their income. They spend without planning and end up deep in debt. Even before committing to a credit card, understand your spending limitations and never spend more than you have. A rule of thumb for positive credit card spending is to always have the cash to back up the purchases you make so when the end of the billing cycle comes around, you have enough cash to pay it in full. Leaving balances remaining on your credit card for long period of time means you are paying much more for your original purchase.