Top mistakes Millenials make with credit cards

When you become an adult, there are suddenly several things you can do that you weren't allowed to do before. You can buy a lottery ticket, go to a Minnesota casino, see more mature movies, buy tobacco products, and if you're over 21 you can purchase and consume alcohol. But besides all these things, it is a time when you are legally able to hold and manage your own financial accounts. It's also the time when you are held responsible if those accounts are mismanaged. Unfortunately, not all Millennials fully understand how this applies to them, and that can get them into trouble as they start to accumulate credit card debt.

Credit cards are a mixed blessing

When you want something on sale just before payday, having a credit card can be super. If you had to wait five more days till payday, you may miss out on that 20% off sale. However, if you buy something on sale before you're paid with a credit card, you might not save after all, if you allow interest to accrue. Many credit card companies are eager to approve Minnesota Millennials, and some may count on collecting extra fees and charges simply because the card holders don't understand how to manage their accounts. Here's some things Millenials, (or anyone) should keep in mind when they start to use credit cards and buy things on credit.

Know your limits

When you start to obtain credit cards there are two types of limits to keep in mind. One is the literal spending limit that the credit card companies have put on your various credit cards, the other is the amount of money you can afford to spend and repay in a reasonable amount of time. When surveyed by Experian, a third of Millennials did not know how much they were allowed to spend on their accounts, and almost as many had maxed out at least one account. Many also did not understand how using a high percentage of their available credit could lower their credit score, which can lead to continued high interest rates on other types loans as well.

Learn how interest and fee systems work

A recent survey revealed that over half of Millenials did not understand how their interest was charged on their accounts or what their actual interest rate was. The most useful piece of information is to know that paying off the balance in full by the due date will prevent the cardholder from paying interest at all -- regardless of how much they spent. It's also important to know that this rule does not apply to cash advances, so whatever the interest is it will be added to the balance. Those who keep their balances close to their credit limit can easily find themselves going over, which leads to being charged extra fees. When bills are too high, it becomes more likely that payments will be late -- which equals more fees. When payments are more than 30 days overdue, they are reported to the credit bureaus and your score can take a serious hit.

Keep an eye on your credit report

There are many reasons to keep an eye on your credit report. You can learn how different credit behaviors such as spending or applying for a new account will affect your credit score. You can also catch a person who attempts to use your personal information and credit in order to open accounts in your name via identity theft. In the U.S., all consumers are able to get their free credit report on annualcreditreport.com once per year. Many don't believe that doing this is worthwhile, and about a quarter fear taking advantage of the service will hurt their score, but this is not true.

Ask for better rates

Mistakes and extenuating circumstances happen to almost everyone, and when it comes to credit card debt, this can lead to higher interest rates and extra fees. Most take the blame on themselves, but for the most part it is worthwhile to ask for a better deal. Many times those who ask do get a deal, whether it's a late fee waived or a lower interest rate all together. Only 10% of 18-29 year olds are bold enough to ask for a credit card company to waive their late fee, and just 3% bother to ask for lower interest.

Knowing common financial mistakes like these and how to deal with them can save a lot of money and frustration. Unfortunately, many don't learn these lessons until the damage is done. Another thing Millenials and others need not be afraid to ask for is help from a bankruptcy attorney if they get too far behind. Depending on the type of bankruptcy filed, many debts can be forgiven and/or reorganized to make payments more manageable. Filing also can stop harassing contact from creditors, and even if you choose not to file, an attorney can help you explore other financial options for a better future. 

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