Many young people enter the real world today without receiving so much as a crash course in credit cards and money management.In fact, many millennials don’t even know the basics of how credit cards work — including what their spending limits are and what interest rate they’re subject to, several studies show. Here are three mistakes for young people to avoid when using a credit card.
1. Maxing out the credit limit
Roughly a third of millennials surveyed in the US by Experian in April did not know the spending limits on their credit cards. Lacking that fundamental knowledge could make them more prone to costly mistakes. About 30 per cent of millennials said they had maxed out a card.
2. Misunderstanding how interest charges work
More than half of millennials surveyed didn’t know the interest rate being charged on their credit cards, Experian found. Many young cardholders also don’t understand how those rates are charged, says Sean McQuay, a credit card expert for personal finance site NerdWallet.
3. Letting late payments hit hard later on
Payment history is the single most important factor when it comes to determining a person’s eligibility for credit, especially with the Al Etihad Credit Bureau in operation in the UAE. All banks in the country charge late payment penalties to cardholders who miss their due dates.
— Washington Post with input from GN Focus
