Yesterday night at about 11PM, when I had finished my dinner, put my baby to sleep and was about to retire for the day, I got an SOS call from my best buddy Agatha. ‘ Hey Cindy I need $3,000 urgently. Can you lend me?’ she asked. My sleepy drowsiness vanished in a minute as I started wondering what was the urgency for her to call me at this time of the day for some cash. ‘The credit card guys are after me and I have a huge debt to pay back’, she said.

Agatha is one of those reckless credit card users who does not mind swiping card for bills as low as $10 and $20. And she has eight such cards spilling over from her wallet. Like Agatha there are thousands of other Americans who misuse their credit cards resulting in the credit card crisis now and card issues resorting to tough measures like cutting credit limit. I have already written on ‘How to free yourself from a credit card debt’.

Let me now state which are the top ten credit card mistakes that many users like Agatha commit.
1. Having a dozen credit cards – Even the most richest people in the world would not require more than two cards. However big a spender you are, one or two cards will be sufficient to meet your needs. If you require more than 2 cards it only means you have to have a relook at your spending pattern.

2. Paying late – Mark the credit card payment date in your calender, or set a reminder in your cell phone or write it in a paper and paste it in front of your bed. Do whatever you have to, to make your credit card bill payment on time. Late payment will lead to a viscious cycle of penalty, service charges, finance charges, interest etc. It also affects your credit score badly. Blogger Millionaire Mommy next door lists 14 ways to improve your credit score.

3.Making only the minimum payment – If you are going to pay only the minimum payment only, everymonth then it will take years for you to settle your credit card dues. If you are not confident of making the payment on time then do not make the purchase. Do not postpone repayment for one or a maximum of two cycles.

4.Using card for small payments – By using credit cards to make small payments you may lose track of all the purchases made using the card. You do not want to end up paying late fee for a toothbrush purchased, do you? 

5.Using the card during overseas trips – Carry adequate cash or travelers check when going abroad and avoid using your card as much as possible. There are additional charges for using your card internationally. But if you are worried about the safety of the cash you are carrying or need a record for the purchase, using credit cards is a good option.

6.Choosing credit cards for wrong reasons – Getting a credit card because it has free airline miles or cash back offers is foolishness. You may end up with a card with high annual fees or exorbitant interest rates.

7.Not checking your monthly statement properly – There could be printing errors or incorrect information on repayment or amount due, which when ignored might pile up into an inflated sum to be repaid. Check your monthly statements properly and follow up with your issuer immediately in case of errors.

8.Read the fine print carefully – Before starting to use your card read carefully the instruction given along with the card, the yearly subscription fees, interest rates, billing cycle and credit period.

9.Exceeding credit limit – Some cards do not allow you to spend beyond your credit limit. But exceeding credit limit may lead to over-the-limit charges, penalty and other charges to be paid.

10.Using card to withdraw cash – Remember your credit card is not a debit card or ATM card. Cash withdrawn using your credit cards will have to be repaid with ridiculously high interest rates.

The Federal Trade Commission has also come out with guidelines on Credit repair and how to help yourself. Try it for more information.

As for Agatha’s debts we spoke to her credit card issuer who promised to reduce the interest rate and also extend the repayment period. I tried to pool in some funds as well to help her and we will settle the debts within 2-3 billing cycles.