Get Smart About Credit Day

George Villa shares ways to avoid common credit card mistakes

ROCK ISLAND, Ill. - Americans now have a record $1-trillion in credit card debt.
On National Get Smart About Credit Day, news anchor James Sears spoke with financial professional George Villa of Villa Tax Advisory Group on FOX 18 News at 7.

GV: Credit card mistakes can be detrimental to your credit score, which is used for everything from buying a new car to getting a mortgage or renting an apartment.
These mistakes can be costly, too. The average American household with credit card debt paid almost $1,300 in interest last year, and that number is going up as interest rates rise.
You can see how much interest can cost you with an interest rate calculator. I have one on my website. You can change the numbers to see how much of a difference a few extra dollars can make.

FIVE CREDIT CARD MISTAKES TO AVOID:
1. PAYING FEES
GV: There are six fees tied to the average credit card. Late fees are the most common, followed by cash advance fees, returned payment fees and balance transfer fees.
If you do not pay your minimum credit card payment by the due date, you will be charged a late fee, which can be up to $37.
That might not sound like a lot, but if you pay a $30 late fee every month for a year, it adds up to $360 for just that one fee. Always make sure you're making at least the minimum payment on your card.

2. MISSING PAYMENTS
GV: Missing payments can negatively affect you for months and even years after that bill is due.
A recent survey showed 6% of millennials believed missing a payment would help their credit score, and 17% believed it would have no affect on their score, which isn't true at all.
If you miss a payment, you'll likely be charged a late fee, your interest rate will go up, the late payment will be added to your credit report and your credit score may drop. That should be enough of a scare to be sure you're making your payments on time.

3. TAKING CASH ADVANCES
GV: When you use your credit card to take out a cash loan at an ATM, there is no grace period-meaning interest starts accumulating right away and there's often a fee on top of that!
The average interest rate on a cash advance is nearly 24%, but some cards charge as much as 36% APR on a cash advance.
The interest rate on cash advances is often higher because card companies view them as riskier transactions that may indicate a cardholder's financial instability.

4. HAVING TOO MANY CARDS
GV: "Trended data" is now being used to calculate your credit score. Because of this, it's now recommended to close the accounts you aren't using. The new calculation will look at someone who has large credit limits negatively because it's easier to rack up a lot of debt very quickly.
While there is no magic number, having 3-5 credit cards is manageable, but anything more than that can be hard to keep track of and makes it easier for you to get into debt.

5. IGNORING YOUR SCORE
GV: An estimated 30% of Americans don't know their credit score, and that number is even higher among young people.
A credit score can determine whether or not you'll be eligible for thousands of dollars in loans when you go to make your biggest purchases, such as a car or a house. Your credit score will also play a factor in how much interest you pay on those loans.
You should be checking your credit score every year. You can get a free credit report from each of the three major bureaus annually. You also want to make sure the information on your credit report is up-to-date and accurate, and that there aren't any mistakes.

For more information and to contact George Villa, visit his website here.


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