With the talk of a potential global recession it’s more important than ever we avoid unnecessary money mistakes and start taking our finances seriously. So today we want to tackle this topic with a specific focus on Women.
Did you know that The latest Personal Finance Index report reveals a gender gap in financial literacy?
Only 45% of women in the US answered the index questions correctly compared to 55% of men. Moreover, the same report notes that financial knowledge is lower among Gen Y and Gen Z women than among Baby Boomer women.
This gap has to change. Aside from researching ways to grow your wealth, such as investing, it pays to learn what money mistakes you’re currently making and how to avoid them.
One of the ways you can manage your finances better is by having better control of your credit card purchases. You know how credit cards work. You charge something and pay the bill at the end of the month. But just because credit card companies reward you for using their cards doesn’t mean you should use them for everything.
Here are some money mistakes to learn from when it comes to your credit.
Using Your Credit Card for Everyday Purchases
Pulling out your credit card just to pay for everyday purchases like food and gas is tempting. After all, you can earn rewards points for doing so. But as we mentioned on the Daily Guru this is a common money mistake for those who don’t have the discipline to pay for things they have already consumed.
It’s easy to forget about the little things you bought with your credit card when you have other financial responsibilities to worry about. The result is that those small purchases can add up, and before you know it, your credit card balance has increased significantly.
The best way to avoid this common money mistake is by having cash on hand or using a debit card when making purchases. If you must use a credit card, only charge what you can pay off at the end of the month.
Maxing Out Your Credit Card Limit Every Month
It’s easy to get in the habit of spending up to your credit card limit every month. However, by doing so, you are putting yourself in a position of having to pay interest on all of your purchases.
You may be able to afford the interest amount, but if you don’t know how much interest you are paying each month, you might not be able to continue doing so for very long.
You can avoid this entirely by using your credit card only when it is absolutely needed and by cutting up any unnecessary cards that are sitting in your wallet.
Applying For Credit Cards Too Often
Applying for a new credit card is easy. You just fill out an application, wait for the card to arrive, and then you can use it to make purchases. However, a guide to soft and hard credit checks by Upgraded Points iterates that each time you apply for a new credit card, your credit score will be affected.
The reason is that the lender will run a hard credit check, meaning they will look at your entire credit history and use the information to determine whether or not to approve your application.
There is a difference between soft and hard credit checks. A soft credit check only involves looking at your credit report, while a hard credit check may also involve contacting your current lenders to verify information on your report. The more times you apply for credit, the more you will be subjected to a hard credit check and the more significant effect it will have on your score.
As much as possible, refrain from applying for new credit cards. If you are planning to apply for a new card, only do so when it is absolutely necessary. And if you do apply, make sure you have a good credit score and no pending bills.
TransUnion’s credit industry insights noted that the total tally of credit cards in the US exceeded 500 million for the first time, thanks to adults aged 18 to 25. If you’re a young woman navigating the financial world with a credit card, remember to practice healthy spending habits. Sound financial decisions have a more rewarding impact on your future than what credit card rewards programs offer.
Articles written by our internal Daily Guru writers, who are certified & qualified growth & development professionals.