5 Things Not to Do With a Credit Card

Applying for a new credit card should serve as a reminder for all consumers to take a refresher course in what you should and shouldn’t do when it comes to a consumer credit profile. Just one mistake concerning personal finances can produce long-lasting consequences that can hurt you financially.

Here are some of the basic concepts of what not to do with your credit and credit cards. All consumers need to review this information to ensure your credit stays on track and in your favor:

Do Not: Submit Too Many Applications for Credit

Every time a consumer submits an application for credit, it has an impact on a credit score. With multiple credit cards applications being submitted in a short period of time, credit scores can actually take a nosedive. Lenders do not look kindly on a credit history showing multiple requests for credit. It does give the consumer an appearance of being reckless with financing. If you are serious about getting a new line of credit, review the many cards on the market and find the ones that make sense for your lifestyle and financial needs. Don’t apply for just any card offer arriving in your mailbox and don’t submit applications simply because your circle of friends has certain credit cards.

Do Not: Spend on Credit Without a Budget

The number one reason consumers find themselves involved in a credit mess is due to the fact they have not established a budget for spending. Credit cards can make it easy to overspend without immediate financial consequences – or so it seems. It is essential to have the cash in savings for every purchase you make on credit. This will ensure you are able to pay the full credit card balance in full each month. Carrying over a balance month after month is not only costly it is also harmful to one’s credit.

Do Not: Use Credit as an Extension of Income

Many make the mistake of thinking their credit limits work like extra income. This is a bad perspective to have of your credit life. It is essential that big-ticket purchases be added to a savings goal plan rather than impulsively extending – or overextending – credit.

Do Not: Make Late/Miss Payments

If you want to bring down your credit score significantly, don’t pay you credit card bill for a month. If you are using a credit card to rebuild credit, it is important that all payments are timely and if possible, made to cover the full balance. Information about your credit card accounts is routinely reported back to the credit reporting agencies and negative information will bring down credit scores and create a long-lasting history of irresponsible financial behavior.

Do Not: Close Multiple Accounts

If you take the time to sit down and analyze your finances only to discover you have too many credit card accounts that are not benefitting you, it is important you don’t close down all of the accounts at the same time. Doing so can drop your credit score as your credit ratios are changed. Instead, consider which accounts you do not want anymore and close them over time. You may also want to allocate a purpose to each card to ensure you are using them to your advantage and benefitting from the rewards and incentives being offered.

Credit cards can do a lot to boost one’s credit status but just a few mistakes and they can have the opposite effect. It is important to pay attention to your accounts, your payments, and your credit card spending habits. If temptation proves too much for you, utilize only one card for small purchases and regularly pay off the full balance each month to improve your credit standing and cut down on credit card expenses.