Managing your money successfully means taking responsibility for it and avoiding mistakes that catch people out. Reports state that high living costs are causing many in the UK to struggle with their bills. While external factors such as these are out of your control, there are some things you can do with your money management habits to put yourself in a better financial situation.
Aside from general money-saving hacks, it’s worth familiarising yourself with common money mistakes.
Not comparing credit card offers
When choosing a credit card, it’s important to take your time and browse the offers available. Choosing a credit card that suits your needs and financial habits is key since not every option may be suitable for your current circumstances.
Many providers will allow you to check if you’ll be eligible before you make a full application, preventing a negative mark on your credit profile.
Ignoring the impact on your credit score
Having an awareness of your credit score is important. A low score means you’ll be restricted when applying for additional forms of credit, such as loans and credit cards.
Some factors that can impact your credit score include errors on your credit report, missing payments and applying for several forms of credit in a short period. Borrowing more than you can afford is another risky concept you should avoid whenever possible.
If you neglect your credit score, this could have a greater impact on your financial future than you might expect. You may struggle to secure a favourable mortgage or other financial products with good interest rates and perks.
Failing to pay the full balance each month
Ideally, you should avoid carrying a balance on your credit card. This happens when you fail to repay your credit card in full each month. It’s important to remember that this is borrowed money at the end of the day.
Remember the risks of compound interest — in most cases, interest is added to your balance at the end of each day. This means you’re charged interest on the interest you owe, not just on the things you buy.
You can use automated payments to help stay on top of your spending. Being able to visibly see and track your spending can be extremely helpful. Sticking to a budget is another way you can stay on top of your outgoings each month.
Not taking advantage of cashback and rewards
If your credit card comes with cashback and rewards, make sure you use these to make the most of it. Rewards range from point to travel miles, allowing you to make savings elsewhere. Just be sure to utilise these without falling into the trap of overspending.
Overspending and accumulating debt
This may seem obvious, but many people can get carried away when it comes to overspending. As a result, debt can rack up easily. Keep your credit card spending within your means so you don’t get carried away.
