Saturday, May 5, 2012

Credit Cards: Nine Things You Shouldn't Do

You're probably familiar with some of the things that you should do as a responsible credit card user: pay your bills every month, keep an eye on your credit card statements, think before buying. But what about the things that you shouldn't do?

Nine things you shouldn't do as a responsible credit card user:

Don't use your credit card for everyday purchases such as groceries, meals or gas. While it might seem like a good idea at first to charge everyday purchases in order to collect points or cash-back incentives, those numbers can add up and leave you with a shocking bill at the end of the month. Unless you're very diligent about tracking your purchases or making payments as soon as you get home from the grocery store, this can be a recipe for undue financial stress every single month.

Don't make only the minimum payments on your credit cards every month. While this might not harm your credit rating, it will make it much harder for you to get ahead financially. Every month that you make only the minimum payment on your credit card extends the life of your debt and increases the amount of interest that you'll pay. Ideally, you should pay off your credit card bills in full every single month.

Don't buy things that you can't afford. Credit cards make it very easy to purchase things on the spur of the moment. However, if you can't afford to buy something with cash, then you can't really afford to charge it. Be honest with yourself: is it something that you need, or is it simply something that you want? It's best to wait until you can afford luxuries before you buy them.

Don't carry a large balance on your credit card. Make a plan to pay off bigger balances and stick to it. While your best choice is obviously not to amass a balance in the first place, maybe you've made a mistake. Maybe you've charged more than you can afford to pay all at once. Don't despair, but do crunch some numbers and figure out how much you can afford to pay every month. Stick to the plan and don't make any more credit card purchases until you're finished paying it off.

Don't apply for another credit card if you use all of the available balance on your first one. Sometimes people rationalize that they won't be offered more credit than they can afford, but that simply isn't true. If you're carrying a full balance on one card, then make a plan for paying it off, rather than applying for other cards.

Don't underestimate the impact of poor credit. Missed payments can lead to poor credit, and poor credit can haunt you for a very long time.

Don't be seduced by the stuff. Credit card companies sometimes offer special gifts for signing up for a card. While it might seem attractive at first, don't apply for a card for the stuff. If you don't need or can't afford another card, then just say no and walk right by the booth.

Don't pay an annual fee. There's no need to sign up for any credit card that requires annual fees. There are plenty of no-fee credit cards on the market, any number of which will be able to meet your needs.

Don't be careless with your credit card information. Leaving your credit card number hanging around is a good way to find yourself in hot water. While credit card companies do have ways to protect you against fraud, it can be a pain to report and deal with fraudulent charges. It's much easier to simply protect your information in the first place. Shred your credit card statements rather than throwing them away, and make sure to log out of your online account especially if you're using a shared computer.

If you're careful and responsible when using your credit card, you'll find that it's a very useful tool that can help you manage your personal finances!

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