Debt Management – 6 Bad Habits to Avoid
Even if you manage to make all you payments every month, there are some debt habits that can cause you trouble in the future. Here are six habits to consider changing.
The first major no-no is accepting every credit card you’re offered. Direct mail offers are designed to make money for the creditor. They may carry high interest rates, unfavorable terms, or high penalties in the event of a problem. Many charge high fees to activate or maintain the card. Read the fine print every time you receive an offer. Don’t assume you don’t have to worry about penalties because you intend to pay on time.
Waiting until the due date to pay may seem like a good way to keep your money as long as possible, but this tactic can backfire. If you mail in your payment, mail delays can cause it to arrive late and incur extra fees in the form of late charges. And while most creditors offer a “check-by-phone” payment option, there may be a fee of up to $10 to make this type of payment.
You may be sure you know how much your minimum payment is and when it’s due. But not reading your bill as soon as it arrives can lead to all kinds of problems. For example, there may be incorrect charges on the bill. If you don’t dispute them right away, you may lose the right to do so. And incorrect charges can be a sign of identity theft. Finally, some creditors may change the due date or minimum payment amount. Some have even been known to lower the credit limit and impose overlimit fees. Or they may change your interest rate. You won’t know unless you read the bill every month.
If you ever take a cash advance on one card to pay another card, this is a sign you’re starting to get in over your head. You may be able to use this tactic on a temporary basis, but eventually, all your cards will be maxed and you won’t be able to make your payments.
You may have earmarked a card for “emergencies”. Using that card for daily expenses, especially consumables like gas, groceries, or eating out is a sign your finances are spinning out of control.
Finally, avoiding a creditor when you have a problem can only make the problem worse. If you have maintained a good record, a temporary emergency doesn’t have to turn into a major crisis. Creditors may even waive late fees or other penalties if you’ve been in the hospital or can show another good reason for the late payment.