8 Credit card mistakes that millennials should avoid from beginning

Many students or Millennials are a huge fan of their plastics these days. For many of them, random usage of credit cards has become a habit to survive in their life. Many of you now prefer to carry a wallet full of plastics instead of cash. Though some mid-20s or early 30s are responsible and know how to use their plastics wisely. But there are many beginners who are unaware of the negative impact of their wrong deeds. So, millennials who just completed studies or entered in a new work life should pay some special attention while using credit cards. Unless you may find yourself falling into a credit card debt trap in near future. And this financial wreck can create huge mental stress at the initial stage of your career. So, it’s better to be aware of some credit card mistakes which are quite common for Millennials.

8 Credit card mistakes that Millennials usually make

Credit cards are popular because they are easy to use and convenient but there are also many factors you should learn before using credit cards. Especially those who are the mid-20s and want to start their career and also build a good credit history. So, here are some common credit card mistakes that you often commit and shouldn’t repeat anymore.

1. Keeping too many credit cards

One of the most common credit card mistakes that are found in Millennials is keeping too many credit cards. Remember, keeping too many credit cards is not a good sign. Because you can easily make unnecessary expenses using these cards. And thus, you may fall into credit card debt traps in future.

2. Using credit cards for daily items

Millennials are often unaware of the proper use of credit cards. They love to swipe a credit card for each and every purchase to meet regular needs. And this is probably most ruinous financial mistakes. You should follow a realistic budget at your initial age. Thus, you can optimize the excessive usage of your plastics. Because don’t forget that you need to pay your each and every bill on time. If you’re unable to payoff your credit card debts in time, then you have to incur interest charges on that purchase. Remember, credit cards can be used only to meet the emergencies expenses.

3. Signing up for wrong credit card

There are many types of credit card available. They all have their own terms and different features as well. You should go for a card which is good for your purpose and suitable for your financial status. Don’t just go for a credit card for the exciting promotional offers and rewards. You need to read all the terms and conditions carefully and think whether or not the card is worth buying for you. Because there are some hidden terms and charges which are higher than your budget.

4. Overlooking monthly statement

Ignoring monthly bank statements can be dangerous. Because bank statements only show whether on not all the charges are correctly mentioned. Most importantly, it will help you to understand if you’re late on payments. Moreover, in these increasing identity theft possibilities, you should check the statement carefully. So, take the credit card statement seriously and take steps according to the situation. Another most important part is, checking the credit card statement can help you to know whether or not you have exceeded the credit limit. Don’t forget the line “the sooner you do it, the better it is for you”. There is no age of financial learning. If you start practicing some good financial habits you’ll be able to avoid many such financial problems.

5. Not paying bills on time

Once you’re making late payments, you’re actually incurring more debts or may penalize for late payments. In this case, you not only have to make late payment charges, but it has serious negative implications too. It will create bad effects on your credit report and damages your FICO score as well. Having bad credit score can make everything difficult. The lender and insurer can deny approving your loan application. You may get rejected from the good employer as well. So, think about the effects before using your plastics in a wrong way.

6. Paying medical bills using plastics

Medical costs are huge but it will be a blunder if you pay the bills with your plastics. In a case of financial hardship, you need to negotiate in paying your medical bills. It is advisable that you shouldn’t use credit cards to pay the medical bills.

7. Wasting all credit limit

Some credit terms will offer huge credit limits for students. But this doesn’t mean that a student can burn the full credit limit. You should keep in mind that the balance of your credit is below 50%. And if you cross your credit limit your score may get hurt.

8. Taking out cash advances

Cash advances is a very costly thing that you frequently do with a credit card. The fees associated with cash advances are very lofty and the rate of interest is also very high. So, you must avoid this option unless or until there’s an emergency.

Final words

Credit cards help a student or a beginner to establish a good credit history. So, if you use your card with much responsibility you may build a good credit score in near future. And a good credit status can make your life smooth after your complete your studies and can move forward towards professional life. So, once you handle your student credit card responsibly things will be more easily and you’ll be able to get a secure financial future with time.

 

Credit cards – People who would be better off without plastics

people who should avoid credit cards

Should you accept credit cards gladly? Those who can use credit cards smartly, the answer is most likely ‘yes’. But what about those people who are not good at managing finances? Should they use credit cards?

Although credit cards offer lots of benefits and rewards, but there are a few kinds of people who should avoid them by all means to save their financial health. But, who are these people? Find out from this article.

People who should run away from credit cards

Credit cards should be a big ‘no’ for the following kinds of people.

  1. Those who can’t pay bills on time: Have you met someone who can’t pay phone bill on time? This person can easily get away by paying a late fee or reconnection charge. But the same person has to face serious consequence for not paying credit card bills on time. His credit score will be damaged. On top of that, he has to pay late fees, penalty and high interest rates.
  2. Damaged credit will make it tough to qualify for a home loan or an auto loan. At that point, the defaulter would think why he did accept credit cards.

  3. Those who don’t read fine print: Anyone can use credit cards. One doesn’t have to be a scholar to use a credit card. Unfortunately, several card holders don’t know how interest rates are applied and the ways to avoid fraudulent charges. Just as people shouldn’t plan to offer a homemade meal to guests without knowing how to cook, people shouldn’t accept credit cards without being aware of the fundamental laws.
  4. Those who are reward fanatics: Some people make useless credit card purchases just to get rewards. They spend more to earn extra reward points subconsciously or unconsciously. They don’t realize that rewards are almost nothing in comparison to the interest if they fail to pay outstanding balance every month.
  5. Those who are struggling students: There is a reason why CARD Act of 2009 made it hard for college students to qualify for credit cards. Students live under a tight budget. A few dine outs, books and parties can fetch a huge credit card bill for students.
  6. Contrary to the popular opinion, I feel students should focus on savings and living with cash instead of using credit cards. They will get lot of time to build credit history.

Conclusion

Credit cards are a good option for consumers who can make full payments every month. Reward credit cards are tough to qualify. So, people with bad credit can try for simple credit cards they can afford every month.

Crossed credit limit? Pay $25 as a punishment

Shopped without any inhibition and crossed your credit limit? Thinking what will happen next? Well, first of all, you should feel lucky since the credit card company allowed you to go over your credit limit. After the Credit Card Accountability, Responsibility and Disclosure Act came into effect, some credit card companies don’t allow consumers to cross their credit limits.

Anyway, let’s get straight to the point. Now that you have crossed your credit limit, the credit card company can charge you an additional fee between $25-$35. Plus, it would also hit your credit score badly.

What can happen when you cross your credit limit?

Credit utilization ratio is a major constituent of a credit score. It basically signifies the ratio of how much credit you have and how much debt you’ve on your shoulder. To have a great credit score, you need to maintain a credit utilization ratio between 30 percent and 10 percent.

Your credit score will drop when you max out credit cards. It is tough to predict how much your credit score will drop. But it will largely depend upon the condition of your credit score at the time you max out your cards. Your score will drop between 25 and 45 points when you have a 780 credit score.

The credit scoring model differentiates between a person who is at the threshold of crossing the credit limit and who has already crossed it. Those who have already crossed the credit limit are at a higher risk of default than those who have not maxed out their cards.

Do you know why credit scoring models penalize consumers? This is due to the fact that consumers can’t manage their credit cards properly. They spend beyond their financial means, make impulsive purchases, and as a result cross credit limits. This is a bad financial behavior and credit scoring models are not ready to tolerate it.

Conclusion

Remember, your credit score will drop when your creditor report the issue to credit bureaus. You can try to avoid the penalty by paying the balance before the statement’s billing date. Try to get information on how and when your creditor can report an over-the-limit balance to credit bureaus.

Bankruptcy destroys credit score – How much truth is in it?

does bankruptcy hurt credit score

Perhaps the biggest reason why debtors are afraid of filing bankruptcy is because of its impact on their credit score. “Bankruptcy destroys credit score” – This is what most people believe by heart. But how much truth is in this quote? Is bankruptcy really the biggest enemy of your credit score? Get your facts correct. Right now and right here.

Bankruptcy – A good friend or an enemy of your credit score?

For those who are swimming in a deep sea of debt, a good credit score becomes a dream for them. It is their most cherished possession. While they’re busy in managing bills, minimum payments, creditors; in the back of their mind lurks only one line,

“What if my credit score gets a more powerful blow? Will I be able to get more credit cards?”

Honestly speaking, credit score shouldn’t be your concern when you’re drowned in a deep sea of debt. Your financial situation is really very bad. In fact, it is so bad that you’re contemplating filing bankruptcy. And people think about heading to bankruptcy courts when all the other options are closed. You’re at a dead end. So stop thinking about your credit rating for the time being at least.

Is bankruptcy good or bad for your credit score?

For some people, bankruptcy can be good for their credit score. Don’t believe it? Just have a look below:

  1. Your credit-utilization ratio drops: The more you owe on your credit card, the higher is your credit utilization ratio and it hurts your credit score badly. Once you pay off debts through bankruptcy, your credit utilization ratio dips. And this helps to boost your credit score.
  2. Helps to improve payment history: Bankruptcy dumps your debts. This means you don’t have to make payments on your old debts anymore. You can finally focus on your bills and other financial obligations. Once you start maintaining finances properly, your credit score starts rising. The pre-bankruptcy credit counseling and finance management course can help you strike a balance between your income and expenses. You can finally start dreaming about a good financial house.
  3. Releases the pressure on credit cards: It is really unhealthy for your finances to be too much dependent on your credit cards. You can apply for as many credit cards as you want. But remember, you’re only the delaying the inevitable. You can pay off a few bills with your fifth or sixth credit card. But you need to pay off these credit cards as well. Your debts are only increasing. Nothing else. This is just a temporary solution.
  4. Bankruptcy can help to reduce and eliminate your debts. You can manage your budget and live a fruitful life.

  5. Replaces bad debts with good debts: Payday loans and credit card debts are costly debts. Most importantly, these are bad debts which don’t help you in any way. Besides, these expensive debts will drop your credit score faster than anything else. Bankruptcy helps you eliminate these high interest debts fast. It gives you a chance to rebuild credit and change the direction of your financial life.

Final recommendation

Bankruptcy has pros and cons like anything else. But it would be utterly wrong to say that bankruptcy is a devil since it gives you a fresh financial start. Yes, it does affect your credit score. Now you have to decide if you want to file bankruptcy and get rid of debts or stay away from bankruptcy to live with debts and poor credit score.

So, this was my take on bankruptcy and credit score. What do you guys feel? Do you still feel bankruptcy is really bad for your credit score? Leave your comments here.

What are the perks of having a 800 plus credit score?

Ever since I have started working as a financial writer, I have been flooded with questions on how to fix credit score, how to get a loan with poor credit score or what are the ways to pay off debt with poor credit score. In all these 3 questions, one thing is common and that is credit score.

I have written tons of articles on these topics and answered thousands of readers’ queries regarding how to repair credit. But, surprisingly nobody has ever asked me how to attain 800+ credit score. May be, people think it is out of their reach. But, I don’t think so, at all.

Tricks to have a 800 plus credit score

Yes, I’m not joking. You too can have a 800 plus credit score and you don’t need to be a financial expert for this. What you actually need is to do is follow one single mantra

“Always pay your bills on time to make your credit shine”

Now, the problem is how to pay your bills always on time. Well, here are the 7 tricks which you can use:

  1. Pay your bills as soon as they arrive
  2. Create a budget and allocate funds for bill payments
  3. Mark the last day for bill payment in your calendar
  4. Strikeout holidays in your calendar since you can’t pay bills on those days
  5. Have the required bill-paying supplies in your hand
  6. Check your calendar every day so that you don’t forget to pay bills
  7. Set up automatic bill payment system with banks

Timely bill payments help you prove yourself as a responsible consumer. You can avoid late fees, harassing collection calls, fines and penalties. What’s more important is that you can have a clean credit report, which is a must for achieving a 800 plus credit score.

Perks of having a 800 plus credit score

Believe me when I say that life becomes fabulous once you have a 800 plus credit score. I know empty words won’t convince you. I won’t even try to do that. All I would request you is to check out the 5 perks of having a 800 plus credit score.

Perk 1: Lenders would love to join your hands

When you’ve a 800 plus credit score, lenders would jump to give you a mortgage loan. Yes, you can get a loan any day you want. Lenders know this fact very well that you’re a responsible credit borrower. You’re less likely to default on a loan, which means lenders have a 99% chance to get back their money.

You’re a dream borrower. Lenders are always in search of such borrowers. So you can practically obtain any loan from all the banks. Just make sure you’ve a regular income.

Perk 2: You’ll get fantastic credit card offers

You don’t need to have a 800 plus score to get a credit card. Yes, I know that. Even a person with terrible score can qualify for a secured credit card. But, the higher your credit score, the better chance you have to qualify for the best plastic cards in the country.

Yes, you’ll get the best credit card offers in any part of the country. You’ll get features like reward programs, concierge service, etc. Not only that, you can qualify for credit cards with low APRs too.

Perk 3: You can get the job you want

Now we all know how some employers check your credit report before offering a job. Yes, it’s not enough to be the best student of the college anymore. Your superb grades won’t of any help if you have poor money management skills. Employers want to offer job offers who are smart money managers. After all, if you can’t manage your household finances, then how would you even try to manage a vast company’s finances? This is especially the case when you’re trying for a government job.

A 800 plus credit score can help you get your dream job. Here’s a perfect example of that.

You’re trying for a government job. There are 2 other candidates who are trying for this job as well. You guys have the same qualification but there is a difference in credit score. Your credit score is 805 and the other candidates’ scores are 650 and 710 respectively.

In this particular scenario, you’ll get the first preference. The second preference will be given to the candidate with 710 credit score and the candidate with lowest credit score will get the last preference.

So, what is your current credit score? What steps are you taking to improve it? What kind of problems are you facing? What will be your advice for others? Feel free to share them with me and readers.