Credit Cards Don’t Have to Be Nightmares. Avoid These Financial Horror Stories in the New Year

Credit cards seem scary.

I was talking to my two nieces (18 and 22) and one day they surprised me by saying they would never use a credit card. They point to the dangers of credit card debt, high interest rates and even the long-term effects of damaged credit.

I can’t blame them. Many of us have heard horror stories about the massive credit card debt that’s taking a heavy toll across the United States. $1.17 trillion This year overall. Enough to scare anyone away. However, when used correctly, credit cards can also be useful financial tools, providing convenience and the opportunity to save on purchases.

Credit cards can help you too build creditwhich is essential if you want to apply for a mortgage or car loan one day.

So I’m here to bring you three credit card nightmares – real-life stories shared with me by my online community – and how to avoid them so you can apply for and use a credit card with confidence.

1. Don’t apply for a credit card for the wrong reasons

“I applied for my first credit card my first week in college… to get a free T-shirt. The school would have them sign it [freshmen] On campus. I mainly use it to eat at Red Lobster. It started a long relationship with high-interest credit that I never really broke away from until two years ago.

While being tempted by a “free” gift or a limited-time welcome offer sounds great, if you’re not prepared to use your credit card responsibly, it’s best to walk away.

Credit card offers, especially for first-time credit cards, often come with perks that can distract from terms that can have serious consequences if you overspend. But it’s important to know your basics first credit card. Each month, your card issuer will send you a statement with your balance scheduled date. This covers all purchases you make before this date, and you’ll need to pay in full on the due date to avoid interest.

You can also make a minimum payment to keep your account in good standing, but you’ll still be charged remaining interest if it’s not paid by the due date. If you don’t want to receive a huge bill on the due date, it’s best to pay off the balance before the bill date.

Once your card is approved, it’s easy to get stuck in a cycle like this: High interest payments If you’re not ready to pay your balance in full initially. Putting your money into credit card debt can affect the rest of your money plans.

When considering applying for a credit card, ask yourself: “Do I need it? What’s the problem?” And stick to the golden rule of credit cards: Only charge what you know you can repay, preferably that month. Don’t let “freebies” cost you more than they’re worth.

2. Read the fine print

“I applied for a credit card that offered 0% interest for a certain period of time. I spent $5,000 and paid off $4,500, thinking, ‘$500 in interest is not bad.’ But when I had the semester deadline, I didn’t I was shocked when they charged me 20% interest on the full $5,000 when I paid it all down to $0.

This is a case of not reading the fine print. Many credit cards offer Introductory 0% APR For new purchases or balance transfer Interest will only start charging on the remaining balance at the end of the introductory period.

But there are financing options – often called something like this, e.g. 0% financing or No-Interest Financing – If you don’t pay off the entire balance by the end of the introductory period, interest may start to be charged on the original amount borrowed.

if you missed payment As with any offer, your card-issuing bank may immediately end the promotional financing period and begin charging you a higher penalty APR. Additionally, you may incur late fees.

The lesson here: Always read the fine print and ask questions before applying for a new card. For example, “If I miss the deadline, will I be charged interest on the entire balance?” or, “Are there any additional fees or penalties I should know about?”

If you apply for one of these offers, have a payment plan ready to pay off your balance on time and avoid incurring any fees. Put the offer end date into your calendar to remind you of your goal of paying off your balance. This way you can enjoy the benefits of 0% interest No need to go into debt.

3. Don’t let an increase in your credit limit lead to overspending

“They suddenly increased my credit card limit. So I was using my credit card more and getting into more debt that I felt like I couldn’t get out of.”

Your credit card limit may be increased by your credit card issuer after you update your income or because you have been using your credit card responsibly. An increase in your credit limit may feel like a bonus, but it may also tempt you overspending. A higher limit doesn’t make debt more affordable, just easier to accumulate.

instead,Pretend your credit limit hasn’t changed. Generally speaking, experts say you should keep your credit card balance at or below 30% of your limit, but I aim for 10% to 15%. This habit can help you maintain credit score Check in and build a buffer, you may thank yourself later.