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Common Practice of Very Responsible Credit Card Users
Most of the advice surrounding credit cards is a laundry list of don’ts and warnings. But in order to use credit cards responsibly and build a good credit score, there are a couple practices you’ll want to remember.
Pay off your balance every month
This is the simplest and best rule. If you don’t want to spend more money than you need to, don’t spend more money than you have. If you pay off your credit card in full every month, you will never accrue interest but you will still build credit.
Research, research, research
Get out a magnifying glass and read that fine print! Don’t get hooked by too-good-to-be-true introductory offers or enticing rewards that hide exorbitant rates. Compare cards and figure out which one is going to benefit you the most before signing up.
One good method is to take a look at your current spending habits and choose a card that is going to work best for you. Rewards may work better for you if you are eligible for bonuses through your day-to-day purchase. For example, some cards offer bigger rewards on gas purchases or airlines while others are better for groceries or CDs and movies. Find the card that fits your spending habits best in order to take advantage of rewards programs.
Avoid the cash advance or super checks feature
These features are best handled by debit cards and old-fashioned paper checks. The credit card versions hide huge fees, high interest rates and dubious payment structures that lead to high balances.
For example, if you use a credit card to get a cash advance from an ATM, you’ll immediately be hit by one, two or three processing fees from your bank and the bank that owns the ATM. After that, you’ll be charged a special interest rate on your cash advance that is usually much higher than your normal interest rate. To make matters worse, cash advances usually don’t get paid off until the rest of your balance is paid off, which means while you work on paying off your normal debts, your cash advance debt is growing at an increasing rate in the background.
Communicate with your credit card company
Credit card companies have two goals: make money and avoid risk. While finding irresponsible customers may seem to benefit the latter goal, credit card companies appreciate someone who isn’t going to default and declare bankruptcy much, much more.
If you have a proven track record—no late payments, no balance—and you know you are going to be late, give your credit card company a call. Explain your situation and show them that you are responsible and they just might let a couple mistakes slide.
Negotiate your terms
It costs money to process new customers, and credit card companies are often willing to haggle a bit on the terms rather than cut their losses. Especially if you have a good history, you can often approach your credit card company with any unsatisfactory issues and they might get re-negotiated.
Keep a close eye on your transactions
The old practice of balancing your checkbook may have gone the way of the cassette tape, but that doesn’t mean there isn’t merit to keeping a watchful eye over your spending. Log on to your account now and then and make sure you can account for all the transactions. Your credit card company won’t be watching out for unauthorized activity or processing errors, so its your job to catch them before its too late.
If your credit card is lost or stolen, the sooner you report it, the less you will have to pay. Credit card companies are required by law to only hold you liable for $50 of unauthorized purchases as long as you report that your card has been lost or stolen before the transactions are made. If you wait too long, you may be liable for more.
Keep it simple
While it may seem advantageous to get as many cards as you can for various discounts and rewards programs, you can often hurt your credit standing this way. Spreading your debt over several cards makes it harder to manage, and even storewide discounts rarely equal savings. Most people will use the perceived savings as rationale to spend more than they normally would.
Keep your credit report clean
Occasionally, someone either at the credit agency or at a business will make a mistake. Its your job to sniff out their errors and correct them. If you are about to apply for a major loan, order a credit report from each of the three major credit reporting bureaus (Experian, Equifax and TransUnion). Review them carefully and note any inaccuracies. Next, dispute each false charge in writing to each credit reporting agency. Then call up the business that made the false claim and let them know that you have disputed their charge and that the agencies will be following up soon. Once the matter is taken care of, make sure that the agencies include a note on your credit report that says that the matter has been resolved.
About the Author:
Paul Basco Provides Expert opinions and reviews to help you Compare and Apply for a Credit Card - Compare Credit Card Offers with GettingaCreditCard.com - Unraveling the best in Personal and Business Credit Cards.
This article may be reprinted in accordance with the GettingaCreditCard.com Reprint Requirements
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