Todd Christensen Profile Picture
Staff Writer at Debt Reduction Services

Learn to use your credit card to your benefit.

What to Do & What to Avoid With Credit Cards

While credit cards can be a pitfall to many consumers, they are not inherently bad. They do come with the risk of borrowing more than can be repaid. However, knowing how to charge wisely can ensure that your household sees only benefits and none of the bills. Here are some tips to avoid the debt while enjoying the perks:

  1. DON’T carry a credit card in your wallet around town. Having a credit card in your wallet means you’re much more likely to use it (and overuse it at that). If you keep a credit card for “emergency purposes only,” then you’re unlikely to be in such a financial emergency close to home that you absolutely need a card. Keep a small emergency cash stash in your car or wallet. I can all but guarantee that even if you were to lose that cash, it would still be less than the overspending and the interest you’d put on the credit card.
  2. DON’T carry a balance on your credit card. In spite of the common sense of this advice, I hear far too many supposed financial experts tell their clients (who in turn become more likely to be our clients) to build their credit by carrying large balances on their credit cards while making only minimum monthly payments for 6 to 12 months. The reality is that you do not have to carry ANY balance from month to month to build your credit. If you want to make a small purchase or a regular payment on your credit, go ahead and do so, but pay it off in full every month by the due date.
  3. DO have a major credit card and use it regularly for small purchases (see #2 above) to build your credit in advance of buying a home. Credit card activity (monthly payments, zero balance) on your credit report is one of the most influential factors in your credit rating.
  4. DON’T get a secured credit card that does NOT report your activity to the major credit bureaus (Equifax, Experian, TransUnion). They’ll charge you fees and probably high interest but not provide you the benefit of building your credit history.
  5. DO shred all credit card offers you receive. That barcode on the offer could be filched from your garbage by an identity thief to open up an account in your name. Better yet, call 888-567-8688 or go to www.optoutprescreen.com to stop receiving all those offers.
  6. DO travel with a credit card rather than a debit card. If you lose your debit card or have it stolen, your entire checking account (and any savings attached to your account as an overdraft alternative) may be at risk. If you lose your credit card, contact the card issuer immediately and you’re likely not out any money at all.
  7. DON’T close out old accounts unless they’re charging you fees or unless the temptation to overspend on the card is too great to resist. Old accounts can boost up to 15% of your credit score.

Bonus Tips:

  1. DO make all payments on time. Don’t wait until the last minute to send a payment.
  2. DON’T keep or apply for credit cards that charge an annual fee and excessive penalty fees.
  3. To build credit, DO consider applying for credit cards from a gas station or retail store.

These do not account for all my Do’s and Don’ts, but they’ll do for now. If you have some Do’s and Don’ts of your own, please feel free to share.

Have a great week!

Todd Christensen

Director of Education, Debt Reduction Services

Do You Have Questions About the Do’s and Dont’s of Credit Cards?

Comment Below and We’ll Answer as Fast as We Can!

We routinely check our articles and blog posts for new comments and make it a priority to respond quickly.

So if you need more information on utilizing credit wisely or have any other questions about your personal finances, please feel free to comment below and we’ll get back on and answer as fast as we can!

  1. allen reier

    i recently watched a program that urged credit card holders with zero to low initial interest rates and service fees to not miss a payment or make any loan inquiry,because it would invalidate the agreement and raise the interest rate …is this true?

    • Todd Christensen

      Hi Allen,
      Thanks for the great question!
      Missing a payment and making a late payment to a creditor will almost always result in some sort of negative impact on your account with that particular creditor and likely on your credit rating as well. If you miss a credit card payment, most credit card agreements already allow for an increase in interest rates to what is known as the “default” rate. Historically, most default rates are in the 20% to 30% range, although we have seen some cards that cater to high-risk borrowers with default rates in the 60% and even 70% APR range. Unconscionable!
      As far as a loan inquiry goes, before the Credit CARD Act of 2009, it was a common practice to see a credit card company raise a consumer’s interest rates because of activity on another account. This was known as Universal Default. However, a simple loan inquiry would generally not have signified on its own that the consumer was becoming a higher risk. Usually, this would be accompanied by late and over-limit payments, fast-growing balances on other accounts, and multiple applications for new credit.
      The 2009 law addressed the practice of universal default. I won’t say it never happens indirectly. If a card company sees from a customer’s credit report that they have become a high risk, they are going to take some sort of action to minimize their own risk. If you had told a friend he or she could borrow $1,000 and then that friend became unemployed and was likely to stay unemployed for the foreseeable future, wouldn’t it make you think twice about the $1,000? Yes, they are in greater need, but if your friend “borrowed” the money, you know that you might as well call it a gift instead. Credit card companies are not in the business of charity, so they have to take measures to protect their money (actually your money, my money, and the money of anyone with a 401k or IRA that invests in that company). If raising the customer’s interest rate is no longer an option, they might then lower the customer’s credit limit.
      Thank you again, and have a great day!
      -Todd

  2. Alan Chapman

    What a great idea! This is really helpful especially in managing credit card debt and get your finances in control. Thanks for sharing this descriptive post,

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