GFA Federal Credit Union

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  • May 20, 2024

3 Bad Credit Card Habits You Can’t Afford to Keep

Credit cards allow you to shop online, pay for travel expenses, and build your credit score. Some credit card companies also offer perks like free airline miles, store discounts, and cash back benefits.

While credit cards can be a useful tool, they can also lead to debt that can quickly spiral out of control. If you’re looking for ways to improve your finances, here are the bad credit card habits you can’t afford to keep.

Making Late or Minimum Payments

Depending on the type of credit card you have, late fees can cost anywhere from $25 to $50. That fee gets added on top of the account balance you already owe. In other words, late payments are one of those bad credit card habits you can’t afford to keep.

It’s also not good to get in the habit of making minimum payments. While this won’t harm your credit score, it will exponentially increase the amount of interest you’ll have to pay. The best strategy is to pay your bill on time and pay the entire balance.

Spending Your Entire Credit Limit

The percentage of your credit limit you use each month is called the credit utilization limit. Ideally, you should only spend 30% of your total credit limit each month. This also includes the balance that’s on your account.

For example, if you have a monthly credit limit of $1,500, you should try to avoid carrying a balance of more than $450. If you frequently spend more than 30% of your credit limit, it can harm your credit score.

One solution is to lower your credit card spending. You can also ask your credit card company to raise your credit limit. That said, raising your credit limit is only a good idea if you routinely pay off your entire monthly balance.

Relying on Balance Transfers to Manage Debt

If you already have credit card debt, balance transfers can be a tool to help pay off your balance. However, this strategy can backfire and lead to more debt if you’re not careful.

For a balance transfer to be a productive strategy, you need to utilize the 0% APR period, also known as the 6 to 18-month interest-free period. Once this period ends, you’ll once again be charged interest on your balance. If you want to pay down your debt, only sign up for a balance transfer if you're able to stick to a strict repayment schedule.

Managing credit card debt is a key part of financial wellness. At GFA, our members have the option to open our Fusion Savings account or our Preferred Choice interest-bearing checking account to help you earn more money. Massachusetts and New Hampshire residents can also visit any of our 10 local branches to learn more. We’re invested in our local communities and are here to help you meet your financial goals.

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