5 Dumb Things to Do With Your Credit Card

Whenever you think “credit card,” you should also think “smart.” Using your credit card the smart way is key to building and keeping a good credit score and to keeping down the cost of carrying your credit score. That said, there are a few things you should never do with your credit score, not if you want to use it the right way.

Loan it to someone else. When your credit card leaves your possession, you have no control over what happens to it or how it’s used. No matter how much you trust the person you lend your credit card to, things can and do go wrong. They may use your credit card in a way you never would. Even if they don’t misuse your credit card, they may not keep it safe and it could get lost or stolen. The best way to control what happens to your credit card is to keep it in your possession.

Forget it anywhere. Yes, mistakes happen. But losing your credit card is dangerous. Whenever you give your credit card to a waitress or other customer service representative always make sure you get it back. If you swipe it to pay for gas or groceries, put it back in your wallet or purse, not in your back pocket. When you use it in the ATM, make sure you get it back. Make it a point to confirm your credit card is back where it’s supposed to be after you lose it.

Max it out. A maxed-out credit card balance is the hardest to pay off, especially if you usually pay on the minimum on your credit card. That’s because your minimum payment is typically calculated as a percentage of your credit card balance. When your credit card balance is higher, so are your minimum payments. Not only does a maxed out balance make your minimum payments higher, it also affects your credit score since a major part of your score considers the amount of your credit card balances.

Take out a cash advance. Cash advances are the most expensive type of credit card transaction due to several different fees you pay for the cash advance. First, you’ll pay an ATM fee if you withdraw cash at another bank’s ATM. Then, you’ll face a cash advance fee that’s typically a percentage of your total cash advance. Interest rates on cash advances are usually higher than any other type of balance. And since cash advances don’t usually have a grace period, interest is added beginning the day you take out the cash advance.

Pay the minimum on your balance. Minimum only payments will take the longest to get rid of your credit card balance. Each month when you make the minimum payment, part of it goes straight toward paying the interest on your credit card balance. Then, what’s left of your minimum payment, which is not usually much, goes toward paying off the actual balance. With minimum payments it could take several months, or even several years to pay off your balance completely.

Avoid making dumb moves with your credit card. The wrong moves could end up costing a lot of money for several years.