How NOT To Use Credit Cards [Complete Guide]

Credit cards are powerful financial tools that can change your life for the better if you know how to use them in a proper manner. However, in the hands of someone who doesn’t know, credit cards are financial hazards.

Have you heard of how someone’s life turned into a disaster because of their credit card? Or how credit cards should be avoided because of the dangers they can bring? A lot of people have the wrong idea of how not to use credit cards.

A lot of people get tempted as credit cards enable users to have a line of credit. That’s a key difference between debit and credit cards. Credit cards can be financial solutions but are just meant to give you temporary relief.

If you don’t hold your end of the bargain, you can end up with a bigger financial problem. If you know how not to use credit cards, you’ll have better chances of not being in a financial disaster. 

Here are shocking statistics from Fortunly about the misuse of credit card:

  • 15% of U.S. households reported that they spend more than they receive in income.
  • About 20% of Americans said that they depend on their credit cards for their basic living expenses.

While it’s true that credit cards can bring a negative effect on someone’s life, it’s never the fault of the credit card. Credit cards are just tools. They have no alignment towards good or evil. Whatever result a credit card could bring is dependent on its user, not the card itself. 

This is why it’s important to know when and how to use and not use credit cards. There are a lot of guides that tell you how to use a credit card and improve your credit score. However, not a lot focus on how not to use credit cards.

We’ve done our research and compiled common mistakes that people do with their credit cards. Here’s a list of how not to use your credit cards.

Forgetting or Thinking It’s Okay Not to Pay Credit Card Payments

People can have different reasons for missing a credit card payment. However, one of the main reasons why they do so is because of forgetting about paying their credit card debt. This is according to Credit Cards.

A national survey of 1,000 adults found that:

  1. 42% have missed at least one credit card payment.
  2. 60% reported that their reason was because of forgetting to pay.
  3. 35% mentioned that their reason was because of not having enough money. 

Here are more statistics about late and missed payments.

  1. 18% reported that they missed one payment. This was the most common.
  2. 17% had missed two to four payments.
  3. 7% had five or more missed payments.

The reason why it’s not okay to miss or forget about your credit card payment is because it can lead you to dire financial problems. More than endangering your credit score, you end up paying more in interest and this gets more troublesome with each missed payment. 

For example, your credit score can drop as much as 125 points after three missed payments. This gets worse with more missed payments and legal actions can be taken against you after five missed payments. 

Forgetting or thinking it’s okay not to pay your credit card payments is one of the ways how not to use your credit cards. While you won’t have a problem with credit card security, you need to develop a discipline of making payments on time. 

Not Paying Bills in Full

Not being able to pay your bills in full or at all can lead you to becoming a delinquent. As a credit card holder, you are to pay a certain amount each month and failure to do this goes against the terms of agreement with your lender. 

The two mistakes on how you can go about doing this is:

  1. Paying less than the minimum amount
  2. Paying just the minimum amount

According to Investopedia, paying less than the minimum amount provides no benefit in relation to being a delinquent. This means that paying less than the minimum amount is much like doing no payment at all. 

Meanwhile, paying just the minimum gets you in trouble because your debt will take much longer and you’ll end up having higher interest charges. According to Ed Mierzwinski, consumer director of the U.S. Public Interest Research Group, 

“if you pay twice the amount of the minimum, that repayment period gets cut in half”. This means that it’s ideal to pay your bills in full or at least more than the minimum amount. 

If you use your credit cards in a frequent manner, be sure that you are capable of making full payments and on time.

As long as you are diligent with your payment, there shouldn’t be a problem. There are a lot of advantages and reasons for using a credit card

Knowing more about how the credit system works can help you better navigate your way through your finance and budget. Learning about the top credit cards in America, the difference of revolving vs installment credit and more can help give you an edge.

With whatever you do, remember what you learned from this article about how not to use credit cards. If you do have a low credit score, know that there are steps on how you can improve it.

Having a sound financial education is the solution to financial despair. We hope you learned something new from this article. Share this with your family and friends so they can also better know how not to use credit cards.