The Don'ts of a Credit Card

There are a lot of things consumers know to do when it comes to applying for a credit card and for using one but rarely is it discussed the ‘don’ts’ of credit card applications and management. The ‘don’ts‘ are just as important as the ‘do’s‘ – maybe even more so. Unfortunately, it is a lack of understand of how credit cards truly work that get people into financial trouble.

Here is a look at some of the things you shouldn’t do when it comes to a credit card:

DON’T apply for multiple credit cards at one time.

Your credit score will take a big hit with too many inquiries for the same type of financing. You should first research the kind of credit card you are looking for and compare it with several others before selecting one or two you want to apply for at one time. If you apply for multiple cards, creditors will perceive that you can not manage your credit effectively.

DON’T go over your limits.

It may appear that credit card companies are very accommodating of your need for extra credit on a big purchase but don’t be fooled. Credit card companies profit big time when you exceed your credit limit. Your best method for protecting yourself from over the limit fees and other penalties is to pay off the balance in full each month and keep spending well within the credit limit. A maxed out credit card has a negative impact on your credit score.

DON’T share your credit card information.

Too many scam artists these days are pros at getting to your credit card information because they are very good at what they do. A rule of thumb for divulging credit card information or other personal data is to never reveal information unless you have initiated the transaction. This rule applies to over the phone, through the mail, and over the Internet or through email.

DON’T miss payments.

When money is tight it can be tempting to take money from one obligation to give to another. You should make every effort to make your credit card payment on time, even if it is just the minimum until you can catch up. In the worst scenario, when you truly do not have access to cash to afford your monthly bill, you need to contact your creditor immediately to alert them to the problem and explore options for repayment.

DON’T charge what you can’t afford.

Another credit card rule of thumb is to only spend on credit what you have the cash to back up. In theory, if you are going to charge the $500 washing machine you want on your credit card, you should have $500 in cash already in the bank to ensure you can pay off your credit card balance in full at the end of the billing cycle.

DON’T cancel your credit card accounts.

When you have several credit cards, some of which you may not even use anymore it is not recommended that you close out the accounts. To do so, you’d end up hurting your credit score ratios, especially if you accidentally close out your longest-running account. Your credit score is comprised of the length of time since you have established credit and if you close the longest-running account, you cause harm to your credit score.

DON’T keep up with peers.

Just because your friends and family have multiple credit cards does not mean you need to follow suit. It is essential that you manage your credit cards in a manner according to your budget, not anyone else’s. The pressure to keep up with family and friends can be a very big risk factor for getting into debt.