Top 10 Blunders on Using Credit Cards

Whether you’re a first time credit card holder and has been using credit cards for a long time, it’s time to make a check on how you’ve been using that plastic.

Here are the top 10 most common blunders that credit card holders often commit:

1) Closing the wrong credit card accounts. Thoughtlessly closing your unused credit card accounts can do more damage than good for your credit. Yes, owning many credit cards do not increase your credit rating, but closing the wrong credit card accounts can decrease your credit rating. How? Closing an old credit card account is like deleting an essential part of your credit history.

How far back your credit history goes is an important factor on your credit. Thus, if you want to avoid spending on your old credit cards, don’t close them. Use them after every few months for a small amount of purchase to prevent your banks from closing them. If you just have too many credit cards in your account, make sure you don’t close your old ones.

2) Maximizing the use of your credit. Maximizing on your credit limit has a negative impact on your credit standing. Financial consultants recommend all credit card holders not to go beyond 50% of their allotted credit. Not only does this protect you from getting stuck in bad credit, it also protects you from being seen as a high-risk borrower by your creditors.

3) Not paying your credit card balances on time. Delaying or missing on your credit card payment is just plain bad habit. In fact, most people who have bad debt or who had to file bankruptcy started with unpaid credit card bills. Not paying your credit cards on time charges you with high interest and penalty fees that could’ve been prevented if you paid your dues promptly.

4) Excessive spending. Overspending on your credit cards is a dangerous practice. First of all, credit cards often come with high interest and if you can’t pay off your monthly balances, you’re in trouble. As much as possible, don’t use your credit card on unnecessary spending or things that you can pay for in cash. If you must use your credit card, make sure that you have planned a way to repay it before its due date ends.

5) Submitting credit card applications to different banks. Do you often apply for a credit card even without the intention of getting it? Perhaps you’re just after a free t-shirt or other freebies that the credit card company offers for new applicants. Watch out! Submitting too many applications to different banks and lenders can be very damaging on your credit. Remember, each time you apply for credit, creditors automatically check on your credit report. Too many inquiries and rejected applications on your credit report affect your credit score.

6) Signing up for the first credit card offer. It’s easy to get enticed by different credit card offers. Credit card companies often use attractive advertisements just to get new clients to sign up. However, if you’re not careful, you might miss the real terms or hidden charges that come with the card. If you want to get a credit card, take the time to compare different credit cards and make sure you clearly understand all the terms and conditions.

7) Using your credit card to take cash advances. Some credit cards also work as debit cards and allow its holders to take cash advances. However, be aware that these come with high interest and you’re charged with the interest immediately after you made the advance. Never use this option unless in extreme emergency.

8) Paying only the minimum on your credit card. Paying only the minimum extends your repayment period. Not only will it hurt you with interest fees, it also puts you at risk of being stuck in bad credit.

9) Not checking on your credit card statements regularly. Every credit card holder must pay close attention to his credit card statements. Always ensure that there are no incorrect or fraudulent charges in your account. Furthermore, updating on your credit card statements regularly helps you submit your payments on time.

10) Failing to read the credit card agreement. Your credit card agreement contains all the terms and conditions of your card. It contains your rights and obligations as a credit card holder. A credit card agreement is a binding contract and once you’ve signed up, you’re forced to comply with what’s in the contract.

 

Allison May is a credit consultant and a writer for Credit Creators. The resource provides consumers with valuable advice and information on credit cards for bad credit,credit cards for good credit and other credit-related issues. Its main objective is to help people build good credit. Copyright © 2008

 

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