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.