Credit card debt really sucks.
I've seen some unbelievable balances over the years. Besides racking up huge balances on your cards, and living like you're Ritchie Rich, there are several whopper mistakes you will want to avoid.
What are the whopper credit card mistakes you should avoid?
1. Using your credit card for cash advances. This is a big mistake. The interest rates on cash advances are typically higher than that for everyday purchase. In fact, they are huge. You may be able to get a better deal from a loan shark. I'm serious, these rates are in excess of 21-24%! We've all seen the examples of how long it takes to pay off debt at regular rates. Can you imagine owing with rates of over 20%?
2. Paying off medical bills. Most medical billers will negotiate a payment plan with you if you have a large bill. I have yet to find one that charges interest. So here are your terms. You can get an extended payment plan and pay no zero interest. Why on earth would you use a credit card to pay off a large medical bill?
3. Allow your friends to use your card. First, don't allow anybody to go shopping for anything with your credit card. Second, avoid "helping out a friend in trouble". Let me tell you why. First, there have been many friendships that have been severed over money. Let's say you use your credit card to help a friend, with the promise that they will pay you back. Then they don't. Now you're stuck with someone else's debt, and you are no longer friends over the issue.
4. Ignoring new offers. How is this a mistake? You could reduce your interest rate down to zero again. Maybe it only lasts 12 to 18 months, but it could potentially save you thousands of dollars of interest. Just make sure the interest rate you get after the offer period isn't higher than what you have now. If it is, you need to pay that debt during the 12-18 month offer period.
You could really argue that having credit card debt in the first place is a mistake. However, credit cards can be a great financial tool as long as they are used responsibly. Think before you charge.
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