It's important to know the rules of the credit card game – preferably before you start playing - if you want to stay out of trouble. These do’s and don’ts of credit card usage encourage healthy spending habits for new and experienced credit card users alike.
Five Things You Shouldn't Do
1. Don't apply for a credit card without reading the terms. Choosing a credit card involves more than liking the design or the credit card issuer. You have to evaluate the credit card based on the fees, interest rates, and rewards if it's a rewards credit card. Comparing credit cards to each other - even across credit card issuers - is a good way to decide whether you're getting the best deal.
2. Don't use your credit card to make everyday purchases. Items like food, clothing, and gas shouldn't be purchased with a credit card. Using your credit card as a substitute for cash is a habit that can quickly lead to debt. For ordinary puchases, leave your credit card in your wallet and use cash or debit card instead.
3. Don't get into the habit of making minimum-only payments. Making only the minimum payment each month increases the amount of time it will take to pay off your debt. It also increases the amount of interest you end up paying. To pay your debts off quicker and cheaper, you should pay as much as you can on your balance each month.
4. Don't use your credit card to buy things you can’t afford. Living a borrowed lifestyle is the quickest way to get into debt. If you can’t afford a purchase today, chances are you won’t be able to afford it tomorrow, or even next month.
5. Don't close out a credit card without knowing how your credit will be impacted. There are times when closing a credit card can hurt your credit score. Avoid closing cards that still have a balance or those that make up a significant amount of your credit history.
Five Things You Should Do
1. Make wise decisions about purchasing items you need versus those you simply want. We’ve all used the word “need” to describe something we really just wanted badly. Using your credit card responsibly means recognizing which things you need and which you just want.
2. Let your creditor know in advance if you won’t be able to make your monthly payment on time. The worst thing you can do is simply forgo your credit card payment, no matter the reason. Most creditors will assist you if you let them know before you miss your payment. Simply call your creditor, briefly explain the situation, and ask that any late fees be waived.
3. Stay within 30% of your credit limit. A large part of your credit score considers the amount of debt you have. Keeping your balances low helps you maintain a good credit score. Not only that, lower balances are easier to manage than those that are higher.
4. Negotiate a lower interest rate, especially if your current rate is higher than offers you receive. Your interest rate determines how much you pay for carrying a balance on your credit card. Evaluate the interest rate on your credit card periodically to be sure you are getting the best deal possible.
5. Review your credit card statement thoroughly each month. Don't take for granted that everything on your credit card statement is accurate. Read through each transaction on your card to be sure that: your last payment was applied correctly, you were charged the right amount for all your purchases, and there are no unauthorized transactions on your credit card. Dispute errors with your credit card issuer within 60 days and report unauthorized charges immediately.