by Christy Bieber | Jan. 28, 2019
Managing your money is hard, and it's inevitable that mistakes will happen, even when you try to be financially responsible.
But, while a little slip-up here and there isn't the end of the world, there are some money mistakes that can have far-reaching consequences.
You don't want to mess up your financial future or make life harder for yourself by making big errors, so check out this list of four money mistakes you should commit to never make again.
With a full calendar and a lot of things on your to-do list, it's easy to forget when your credit card, mortgage, or utility bills are due. The problem is, if you pay late, you'll likely get hit with a fee.
Late fees vary depending upon the terms of your agreement with your lender or company you owe. If you're late on your mortgage, your lender typically charges a fee equal to around 3% to 6% of the payment you should've made. If you're charged a 3% late fee on a $1,500 mortgage payment, you'll owe $45.
If you're more than 30 days late on any payments, you could also end up with a 30, 60, or 90 day delinquency reported on your credit report. This can be a big problem because even a single late payment could cause a great credit score to tumble more than 100 points.
While you usually have a grace period of a few days to make your payments after it's officially due, you don't want to leave things to the last minute and take a chance on facing the consequences of late payment. Instead, find a way to avoid this.
To make sure you never make a late payment again, you could set up automatic payments with your bank or with the company you owe. Or, you could sign up for text alerts that warn you when your payment is due, or could add your payment due dates to a calendar with reminders.
Whatever approach you choose, just find a way to make sure you pay at least the minimum by your due date and are never late in paying again.
Your credit card has a spending limit. If you exceed the credit available to you, this is called going over the limit. If you do this, you could be charged around $25 for the first time you go over the limit and $35 for subsequent incidents within six months.
Not only should you avoid going over your limit, but you should ideally also avoid getting even close to your credit limit. If you use more than 30% of your available credit, this will hurt your credit utilization ratio.
Your credit utilization ratio is the second most important factor in determining your credit score after payment history. It's the ratio between the credit you're using and the available credit you have. And, the lower it is, the better your credit score will be.
To make sure you don't go over the limit on your cards, keep track of your credit limit for each account and monitor your spending. You can sign into your online credit card account regularly to see if you're getting close to the limit. If you are, stop using the card until you've paid down the balance.
You're not supposed to take more money out of your bank account than you have in it. This means you shouldn't write checks you don't have the funds to cash and shouldn't use your ATM or debit card for purchases you don't have the money to cover.
If you end up withdrawing more from your checking account than the account balance, you'll be charged an overdraft fee. This is one of the more expensive bank fees you could be hit with. While it varies by bank, it's usually around $20 to $50.
You can avoid this fee by making sure to keep some extra money in your bank account so you aren't getting close to $0 and at risk of overdrafting. You can also track your spending, including recording checks you write.
Some banks offer overdraft protection, where you link your bank account to a savings account or a credit card. If you overdraft your account, money is automatically transferred to cover the shortfall. Unfortunately, there may be fees associated with overdraft protection so check with your bank to see what you'd end up paying before you take this approach.
Finally, if you're paying just the minimum balance on your credit cards, you're making a very costly money mistake.
Ideally, you should pay off each credit card when the card statement comes so you never carry a balance. That way, you'll never need to pay interest -- which can be quite high on credit cards.
If this isn't possible and you're carrying a balance, the last thing you want to do is just pay the minimum. Looking at the math, it's easy to see why this would be a big mistake.
Say you have a card with a $4,000 balance that charges 17% interest and that has a minimum payment of 2.5% of the balance or $25. If you pay just the minimum due each month, you'll pay $4,409.16 in interest and it will take you 187 months to get the card paid off. You probably can't afford to waste $4,400 and essentially more than double the cost of your purchases. So, you need to pay more than the minimum.
You should pay the maximum you can afford each month on high-interest credit card debt to get your debt paid off ASAP. But, even a little bit extra can make a big difference, so just do what you can to pay more than the minimum even if you're sending just $10 extra each month.
Paying your bills on time, keeping your cards under the credit limit, keeping your bank account above $0, and paying more than the minimum due each month are all important to financial success. If you never make any of these money mistakes again, you'll be much better off.
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