Take Action: The Seven Credit Card Habits You NEED to Break

It’s crazy to think how that tiny piece of plastic you carry around in your wallet everyday has the power to either build up something positive, helping you to acquire products or services you may really need- or cause some serious damage. Not that you need to fear for your life every time you wield your credit card, but it is some serious business. Here at Apruebame.com we want to make sure that you know what you’re getting into when using your credit card and have a couple of our safety tips in mind so that you don’t end up a dangerous situation.

Now, we know that everyone is always telling you what you should be doing but getting so much advice can be easy to filter out. It might go over your head, thinking it doesn’t apply to you. So, we want to highlight the 7 Bad Credit Card Habits and point out some potentially dangerous habits you may have to hopefully point you in the right direction and get you out of the danger zone! 

1. Choosing the wrong card.

   Because there are so many options about what kind of card you could choose from (cash back, no annual fees, travel rewards, etc.) you may be inclined to apply for as many as possible, or to pick one with the most enticing offer at the time. But did you know that just applying for a credit card can affect your credit score? In any case, it is important that you read the fine print of any card that you pick, and that you are careful not to fall into a trap of “rewards” where you find yourself spending more than you should, just to achieve “status”.

   What to do?

   Always check your credit before applying for a card. Those with excellent credit are likely to get approved for any card they apply for, but if yours is down there in the not-so-good range, consider a secured card to help improve your credit. What is a secured card? A secured card requires you to put down some cash collateral deposit, which then becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500.

   When choosing which type of card to apply, consider things like the interest on purchases, the late fees, and the how likely you are to use that reward. If you travel a lot or plan to take a significant trip, it may make sense to get a credit card that gives you miles. But if you travel once a year, you may want to get a credit card that has other types of rewards. It also depends on the usage you will give the credit card. If you are going to use it in lieu of cash and at the same place all the time, maybe get the card that gives you points or coupons to shop there. Always weigh the pros and cons of the rewards, and focus on the basics: interest rates, fees and penalties.

2. Having too many cards.

   How many cards do you have in your wallet right now? If the answer is more than two, you’re playing a dangerous game. Not only does applying for so many cards run the risk of damaging your credit score, but trying to keep up with all the different payments could eventually lead to debt. Even worse, say you lose a card. Depending on the number of cards you have, it could be a while before you notice it’s even missing, and that could mean you end up paying for some very lucky thief’s shopping spree. Besides, it MUST be annoying to have to dig through your whole wallet to find the right card every time you go shopping, right?!

   What to do?

   Simple. Only take with you the cards you actually need and/or use, which should really just be one or two. Try your best to stick with that one good card that offers you the best rewards. All this to say, you don’t need to close your other accounts, because keeping them active can aid your credit.

3. Overspending.

   Don’t spend money that you don’t have. This is how you get into debt. We cannot stress this enough. It can be tempting to use your card for a big purchase thinking you’ll be able to pay it off in the future, or to mindlessly buy things every day because you think you’re gathering points and rewards. But if you’re not consciously checking your balance and making a budget to save up for the things you really want and need, you’re playing the game all wrong.

   What to do?

   Keep track of your spending and your credit reports. Use your budget wisely to know what you truly can and can’t afford, and ultimately, be patient. If you have over spent and are trying to pay your credit card down, call your bank.

   Some banks can put your card on “hold” while you work out some type of payment arrangement with them. Always call and ask, because information is power.

4. Not using your card.

   Oddly enough, some say that not using your card can be as bad as overspending. While overspending may lead to debt, inactive cards can lead to cancellation by the issuer, increasing your credit utilization if you have an outstanding balance on your card. And because your credit utilization is a big factor in your credit score, it will be affected and even go down if your card gets cancelled.

   What to do?

   Keep track of the cards you have. If you are already in the good habit of only having a couple of good cards, then this should be easy. But, regularly check all your accounts, and if you have a card you would like to keep open, you can decide when to make purchases with that card so that it doesn’t go unused. If a bank does cancel an unused card you have, you can try to call the issuer and ask them to reopen your account in exchange for making a purchase right away. That way, if you still have a remaining balance you need to pay off, you can do so and maybe later cancel the card on your own time and your own dime. Although we suggest to never cancel a credit card, unless it is absolutely and completely necessary, as this can affect your credit score even more.

5. Not reading your monthly statements.

   This is just a part of keeping track of all your cards and your spending, but the other important note on reading your statement every month is that this allows you to monitor unauthorized spending, or maybe even a billing error. Though this is an impossibly boring task to stare at a page full of numbers every single month, you could be losing money that you’re not even aware of if you don’t. This is just one of those boring adulting tasks that we must do.

   What to do?

   Review your entire credit card statement for activity, not just payment, every single month. Something that might make this easier is to set alerts through your phone so that you can be aware of unauthorized payments in that moment, but this doesn’t replace the act of reading through the whole thing. It is part of being a responsible adult, and of taking care of your own financial future.

6. Paying your credit card late - or even barely making the deadline.

   The risk is too big to mess around with late payments on your credit card, and especially in an age where we are surrounded by devices that can give us reminders and notifications about everything, there really is no excuse to be pushing it. Try to at least make your minimum payment, and always by the due date. The moment you pay late, you incur in late fees on top of the interest. So, you are losing more money.

   What to do?

   To keep yourself at ease, we recommend setting a reminder for 3 days before your credit card payment is due, and paying it off then, because 35% of your credit score is determined by the timeliness of your payments. It is very important you are serious about this. And if you want something a little more routine so that you don’t forget to make your payments, you can arrange to have weekly payments (which also means a shorter statement to review!)

   Also, if your payment due date doesn’t work well for you, you can call your bank and move it. Yes, you read it right, if you receive your big paycheck on the 30^th and want your payment to be on the 1^st, you can call and ask for that.

7. Always paying only the minimum balance.

   Closely related with your credit utilization, paying the minimum balance affects the overall credit availability. Although you’re not going to accumulate debt by late fees if you pay the minimum, your credit score can be affected by running too high of a balance relative to your limit.

   What to do?

   The best plan of action is to pay your balance in full every month, or close to it. With the help of a budget, this should be possible. This will aid your payment history and help you to avoid interest. And keep your balance low, so that your credit utilization is ideally only about 30% of your total credit line.