7 Devastating Credit Card Mistakes to Avoid

Written by Joe Taylor Jr.
Posted On: February 26, 2010

Every month, our mailbox fills up with letters from readers asking how they can keep their credit scores high and their balances low. Avoid these seven common mistakes to maintain control over your credit cards:

#1: Maxing out your credit limit.

A no-interest balance transfer might seem like a great way to save money. However, if you use up��your credit limit on any single account,��credit scoring systems penalize you with a high "credit utilization" ratio. Anything you save now will get spent later in the form of higher interest rates and insurance premiums.

#2: Saying "yes" to every retail discount card you meet.

Opening new accounts too frequently makes you look like a risky borrower, even if you pay off your promotional purchases quickly. Closing out unused accounts dings your credit score, too, making it harder to get substantial credit when you need it.

#3: Co-signing credit cards for children or friends.

Most personal finance experts agree that you're a better parent if you teach your children to fend for themselves. You don't want to ruin your relationship over someone else's unpaid debt.

#4: Missing a credit card payment.

New credit card rules mean you won't get hit as hard with penalties if you forget to mail a payment on time. However, your credit score can sustain major damage when a payment posts 30 or more days behind schedule.

#5: Hiding from credit card collectors.

Sometimes, life can spin out of control. If you're over your head with credit card debt, communicate with your lenders. Negotiating with original creditors can prevent your debt from getting turned over to nasty bill collectors or sent to a court for summary judgment.

#6: Failing to read the fine print on teaser rates and other special offers.

Most promotional offers come with strings attached. Miss payments or fail to pay off your no-interest promo before the date listed in the fine print, and you could find yourself charged with a boatload of fees.

#7: Impulse buying and overspending with no household budget.

Just like you shouldn't go food shopping on an empty stomach, try not to hit the mall with a wallet full of credit cards. Planning your spending may sound boring, but it's the best way to keep your credit card debt under control.

In all seven of these cases, taking the time to plan out your saving and spending on a calendar can help you prevent making money mistakes. It's okay to treat yourself occasionally, but keep focusing on the benefits of mapping your finances to a bigger picture.

Posted in Credit Card Help
About the author:
Joe Taylor Jr.
Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.
6 Responses to "7 Devastating Credit Card Mistakes to Avoid"
  1. Parenting Guide April 05, 2010 at 9:17 pm

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      Reply»  
  2. Burton Haynes April 05, 2010 at 12:24 pm

    Thanks for the nice post. I always like to save concrete or construction related posts like this one.

      Reply»  
  3. Sergio Scripps March 22, 2010 at 8:05 am

    This post is beyond awesome. I am always wondering what to do and what not to do so I will follow some of these tips.

      Reply»  
  4. Tilda Basner March 16, 2010 at 4:03 am

    I enjoyed reading such a great post. Such entertaining writing is rare these days. Informed comment like this has to be applauded. I'll certainly be looking in on this blog again soon!

      Reply»  
  5. Aaron Smith March 11, 2010 at 5:01 am

    Closing a credit card account that still shows an outstanding balance does not prevent the credit bureau from considering the card account while calculating your credit utilization ratio. However, while you're paying down the outstanding balance on this account, it does have a positive effect on your credit score. Once you completely pay off the card and the balance shows up as ��0��on your credit report, the credit bureau will stop including this card account while calculating your credit utilization ratio. However, if you choose to close a card account which is paid off and no longer used, it will bring down your available credit limit and reduce the length of your credit history. This in turn will raise your credit utilization ratio thereby reducing your credit score. So, it is advisable to not close unused credit accounts all at once. Other than this, there are several other ways to improve credit score. One needs to follow them in order to repair his credit and raise his score.

      Reply»  
  6. Sean March 07, 2010 at 10:13 pm

    Amazing post! I loved how informative it was, keep them coming! Cheers!

      Reply»  

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