Credit cards can be excellent financial tools when used properly. On the other hand, they can be quite costly if you do any of these donts. The following is a list of the top 10 things of what not to do with your credit card.
Don’t Go Over Your Credit Limit
Going over your credit limit can easily add a $35 fee each time you do. In addition, going over your limit – even just one time – gives your credit card all the permission it needs to increase your interest rate. Obviously, this higher interest rate can increase your debt substantially if you are carrying a balance on your card.
Don’t Pay Late
Paying late can also lead to fees and increased interest rates. In addition, your timeliness in repaying your debts plays a larger part in your credit score. Other credit cards also have the right to raise your interest rate if you miss a payment on just one of your cards. Even if you only pay the minimum amount due, be sure to pay each month and on time.
Don’t Cancel Credit Card Accounts
Each credit card in your wallet carries a piece of your financial history with it. If you cancel a card, the history created will be wiped out from your credit report and can reduce your credit score.
Don’t Pay High Interest Rates
Even if your credit history isn’t so great, you should never have to pay an 18% interest rate on your card. Find out your credit score. If it is 700 or better, call the card and negotiate a new rate. If the company won’t budge, transfer your balance to a card that will provide you with a better rate.
Don’t Charge Additional Expenses to Your Balance Transfer Card
Typically, the great low rates you get on a balance transfer card only apply to the balance that was transferred. New charges can be quite costly. Before you start charging on a credit card you used for a balance transfer, make sure the interest rates on purchases are reasonable.
Don’t Use Your Credit Card for Cash Advances
Cash advances on credit cards are charged at a high interest rate. In addition, the credit card company will apply your payments toward your regular balances before applying it toward your high interest balances.
Don’t Use a Card that Uses the Two-Cycle Average Balance Method
Credit cards that use the two-cycle average balance method to determine finance charges can be quite costly if you carry a balance on your credit card from month to month. Make sure the credit card in your wallet uses the average daily balance method instead.
Don’t Pay Your Credit Card Off with a Home Equity Loan
A home equity loan is backed by your home, which means you will lose your home if you do not make the payments. A credit card debt, on the other hand, is unsecured. The risks are far less if you fail to make these payments.
Don’t Co-Sign on a Credit Card for a Friend
Co-signing for a friend may seem like a nice thing to do, but it puts you at risk if your friend doesn’t make payments on time or defaults on the debt completely. The irresponsibility of your friend will show up on your credit report.