Credit cards can be highly beneficial when they are used correctly, but can be detrimental to your finances when not used responsibly. Below are some credit card habits that you should avoid in order to be a savvy credit card user.
Make Payment Arrangements When You’re Struggling
Instead of ignoring your accounts when you are struggling to make ends meet, call your creditor to see if payment arrangements are available. Even one late payment can cause your score to drop 100 points (depending on your score before the missed payment). You’ll also most likely be charged a late fee and a penalty of higher interest rates for a few months.
Stay Within Your Credit Limit
If you go over your credit limit and you’ve opted into a program that allows your card to be accepted for over-the-limit purchases, the credit card company may charge a fee however, many companies have stopped doing this. Your credit score will also be affected because of the fact that your credit utilization ratio makes up 30% of your FICO score.
The biggest piece of advice that can be offered to you is: if you don’t have the money to buy it and plan to use a credit card instead, don’t buy it!
Don’t Apply for Too Many Cards
Submitting too many applications shows desperation and trouble to lenders. This type of activity in your credit profile can lower your score, especially if you are just starting to build credit.
Don’t Get a Higher Rate Card for Perks You Won’t Use
The allure of bonus points, miles or cash back may seem like a good deal that you don’t want to pass up. However, preapproved offers don’t mean that you’ll be approved, that you need the card, or that it’s a good fit for you. If you don’t travel much, you probably don’t need the frequent flier card and you’ll find yourself overspending in order to earn points that you don’t need.
Avoid Closing Accounts
Closing your credit card accounts because they are no longer useful to you can impact your credit utilization ratio. If you are closing accounts to escape your responsibility, you will still be responsible for those accounts and they will also remain on your credit report for 7-10 years.
Remember: if you are not regularly checking your credit profile, there is important information you could be missing, even if your report has been good in the past. One mistake on your part can cause your credit score to drop. By not checking your report, you may also be missing errors that are affecting your score that could be fixed if they are caught sooner, rather than later.