Especially during tight financial times, Americans have become obsessed with keeping their credit card balances low and their credit scores high. Seven surprisingly easy mistakes can stand between you and your money.
Top 7 Credit Card Mistakes to Avoid
#1: Trading too many credit card applications for retail discounts.
Many credit scoring formulas interpret a flurry of new credit cards and risky and impulsive, even if your history indicates that you pay off promotional purchases promptly. Meanwhile, your credit score can suffer when you close unused accounts, making it hard to get the kind of credit cards you really need.
#2: Hitting your credit limit.
You can measure your credit utilization ratio as the percentage of credit you’ve got left on a given card. Take any of your cards too far above 50% utilization, and many credit scoring formulas penalize you. Avoid balance transfers that use up your new credit lines, unless you want to pay higher interest rates and insurance premiums.
#3: Missing a credit card payment.
Even with lighter penalties promised by new credit card regulations, forgetting to send your check in on time can hurt your long term credit score. Some banks report a late payment for as long as two years.
#4: Ignoring your budget and buying on a whim.
Malls don’t always mix well with shiny, new credit cards. Impulse buying can kill your budget, robbing you of the cash flow you need to meet your long term savings goals.
#5: Co-signing on credit cards.
Unpaid debt can ruin relationships between family members or friends. It may sound like tough love, but emotional support does more for the people in your life than cash ever can.
#6: Missing the fine print on special offers.
Teaser rates may convince you to make that special purchase, while bonus rewards can help you switch credit cards. Either way, failing to adhere to the strict terms of a promotional offer can cost you dearly. Miss a payment or a payoff deadline and you could face a lengthy list of fees.
#7: Avoiding credit card collectors.
Everyone has bad weeks, or even months. Communicate with your lenders when you’re over your head. Negotiating with the original creditor can keep you from facing harsh professional collectors.
You can prevent any of these seven mistakes by getting serious about managing your credit cards more effectively. Use a calendar or a software tool to track your spending throughout the month. You can still splurge from time to time, but keep thinking about how good you can feel when you’re debt free.