I love using credit cards. Each month I check my statement to see how my spending has translated into frequent flyer miles. In a few months I will be traveling to a Caribbean island on a ticket paid for with airline miles I earned by using my credit card. I’m not exactly sure why, but there is something especially sweet about a free plane ticket.
Using credit cards can get you free plane tickets, cash, merchandise, or, if you’re not smart about it, a whole heap of trouble. Believe me, there is no joy in a free plane ticket when you have bill collectors hounding you so I want you to know how to use and now not to use credit. Here are 5 silly mistakes I want you to avoid making.
- Signing up for a card just because an offer came in the mail. It might be the best card ever but before you sign up do a little research. It is pretty easy to find sites that will help you find a card that suits your needs. If you are just starting out, find one that has no annual fee. If you are going to travel abroad find one that has no foreign transaction fees. One site that offers extensive reviews of cards that are available is www.NerdWallet.com.
- Signing up for every card you can. One credit card is good; it gives you flexibility, security, miles, and all sorts of goodies. But owning three, four or five cards is not good. Stick to just one.
- Only paying the minimum payment due. Please don’t make this mistake! This is probably the one I most want you to avoid. When you do not pay your credit card off completely each month, the balance on the card accrues interest. Unless the card has a zero percent interest rate, your balance will increase because of this nasty interest. Anyone can tell you life looks pretty bad when you have credit card bills hanging over your head. Pay the entire card balance off every month. If you have a card now and you are carrying a balance, put the card in a safe place and switch to spending cash only until you get your spending under control.
- Spending up to the limit on your credit card. One of the reasons you have a card is to establish a credit history for future purchases in life such as a house or car. A formula is used to calculate your credit score and the higher your score, the more likely it is you will be approved for those purchases. One factor that goes into the credit score formula is whether you maxed out the card. When you hit the max, your score drops 10 points. So don’t make this mistake; stay below 10% of your card’s spending limit.
- Sending your credit card information in an email. You might as well put it on the front page of the local newspaper. Protect your identity by keeping the card in a safe place and check the charges to make sure someone has not snagged your card to book first class tickets for two to Rio. If you are ordering online, make sure the site is secure. It should have an https:// and a symbol of a little lock. Otherwise, call the merchant to give them the card information over the phone. It’s not perfect but it’s a lot safer than emailing.
Avoid these 5 silly mistakes and you will be on your way to becoming a master of the credit card. When you first get a card, make a few purchases, pay them off early and get comfortable with how it works in your life. Be sure to let me know when you have earned your first plane ticket!