5 credit card mistakes to avoid right now

WHEN times are tough, credit card debt may be inevitable if you’re learning to manage credit or are forced to make risky financial decisions due to hardships.

Having a plan may help you avoid debt or keep it manageable when money is tight. If your circumstances allow it, consider alternatives before making credit card mistakes that make it difficult to bounce back.

Here are five credit card mistakes to avoid right now.

DON’T KEEP SPENDING AS USUAL

Change your budget if inflation or other circumstances are jeopardising it.

“Look at the budget and take a hard look at those needs versus wants,” says Katie Bossler, quality assurance specialist at GreenPath, a US non-profit credit counselling agency.

As you’re reviewing your credit card statement, consider cutting out unnecessary purchases or unused subscriptions. Prioritise essentials like rent, utilities, food and expenses that help bring in income. If you’re still stretched financially after making changes, consider other options like part-time work, or getting roommates, says Bossler.

AVOID RELYING ON YOUR CREDIT LIMIT

Trimming your budget may offer opportunities to save that prevent you from relying on credit cards. Save what you can — even just $500 per week. An emergency fund is foolproof, but a credit limit can eventually max out or get slashed at the issuer’s discretion.

Before that happens, request a higher credit limit from issuers when accounts are in good standing. This way, you have some credit available as a last-resort option that supplements an emergency fund.

DON’T CARRY A BALANCE ON A HIGH-INTEREST CREDIT CARD

Carrying a large balance on a high-interest credit card makes purchases more expensive. Some credit card interest rates run very, very high. While a card’s interest rate depends on economic factors and your credit, some cards or institutions offer lower rates that may save money on ongoing balances.

STOP RACKING UP LATE FEES

If you foresee a late payment, contact your credit card issuer quickly. Some issuers may be able to change your due date, offer financial hardship programmes or refer you to a debt management plan, according to Bossler. These programmes may waive fees or lower interest rates for a certain time frame.

THINK TWICE ABOUT CASH ADVANCES

A credit card cash advance conveniently provides a short-term cash loan at a bank or ATM, but it’s costly. The interest on the amount of cash borrowed starts accruing immediately and fees may apply.

Instead, consider a personal loan or targeted offers from issuers that turn available credit on a credit card into a less pricey installment loan that puts cash in your bank account. For the latter option, there’s no loan application or credit check required.