People who have never been in serious debt often scoff at those who find themselves racked with credit card payments. But the truth is that many of us never learned good credit management skills. They certainly don’t provide much financial education in either high school or college, so lacking the know-how to stay out of debt is understandable, if not common. So whether you’re new to consumer credit or you want to turn a bad credit history around, here are some pitfalls to watch out for.
- Signing Bonuses: Most credit card companies now offer some sort of enrollment bonus to attract new customers. You may think you’re being frugal and wise by taking advantage of these bonuses, but be careful where you sign. Watch where you step. Read the fine print and see if there are spending thresholds attached to the benefits. Make sure you’re not going to put yourself into debt trying to cash in your signing bonus. Not only will you potentially find yourself further into debt, but you might also be sabotaging your credit management plan.
- Avoiding Annual Fees: Another reason to watch out for signing bonuses is because they’re often associated with cards that come with annual fees. These fees hit you every 12 months, and often at the very time when you can’t afford them. As an avoidance tactic, some people develop a strategy: spend enough on a card to get the bonus, and drop the card before the annual fee kicks in. Although this may sound good in theory, this plan for attack can actually severely damage your credit score. The key to raising your credit score is to build long-term accounts in good standing with your credit card company. Not only will nurturing a relationship with your credit card company result in your credit score, you will also learn credit management skills necessary to maintain a debt free lifestyle.
- Endlessly Transferring: Credit card companies have had a lot of success with pushing balance transfer offers. According to CreditGuard, if you’re sure you can make a transfer and pay off the balance before the introductory rate period ends, it might be a wise thing to do. However, if you find yourself bouncing your balance from one offer to the next, it is probably time to look for help. Debt consolidation services not only roll your credit accounts into a single bill, but these services also help you save money, learn essential credit management skills, reduce interest rates and minimize the time it takes to repay your debt.