Managing credit cards can be like playing with fire. Even in this economy, it’s far too easy to get credit cards. For years, the credit card companies have issued cards willy-nilly, practically giving one to everyone who applied. So what if your credit was bad? They just charged you more interest, knowing they’d make a killing off you anyway, since you wouldn’t be paying off the balance each month.
Using credit wisely will help raise your all-important FICO score. Remember, building good credit is like bailing out the Titanic with a teaspoon-it’s a long and slow process but can be literally destroyed overnight by poor credit use. The single most important thing is to pay ON TIME. Hopefully, you are being a good steward of credit and living within or below your means, but if not, never, ever pay less than the minimum and never pay it late.
Back when we relied on a check to travel the mail for about a week to arrive at a payment center, there was no guarantee that your payment would arrive on time. With the advent of online banking, there is simply no reason to pay a bill late. You can program the bill’s due date into your online banking, and pay it a couple of days early to be safe. With many cards, you can set up the bank draft to pay the minimum, the full amount, or an amount you choose. Just one late payment can cost you a ridiculous late fee, probably $39 or so. Then don’t forget the interest that will be added. If you have a very high balance, say a couple of thousand dollars, this can be appreciable. And as a final punishment, your card will automatically increase to the highest possible interest rate. Over the life of a balance, this can be hundreds of dollars. Think of how hard you work for your money. How long do you have to work to earn that extra $100 or $200 that this slip up will cost you? What else can you do with $200? I could pay my power and cable bill with that. Looking at your money in this context really puts it into perspective.
If you have several credit cards that are open, do not close out the accounts. The credit card companies have got wrecking your credit down to a fine art. They hope you won’t learn all the tricks they use. This is why Americans pay millions of wasted dollars in late fees, interest, and other hidden charges. You are lining their fat pockets with your hard earned money. If this makes you mad, it should. Back to those cards. Quietly cut them up and throw them out. Leave the accounts open. If the accounts are open with no charges on them, this shows that you haven’t maxed out your available credit lines, which lowers your score. You should check your credit report once a year from each of the 3 credit companies to insure that it is correct. If you find any errors, contact the companies immediately.
It’s easy to view that innocent-looking piece of plastic as a free pass to go on a shopping spree. Sliding plastic doesn’t feel like it does when you pull the bills out of your wallet. Just because a card has a $1000 limit doesn’t mean you should max it out. In fact, other than a true emergency, NEVER max out your card(s). If you have one credit card maxed out, then you are using 100% of your available credit, which lenders frown upon. Try to go buy a car with that on your credit. You may get the car, but you can bet you won’t get an attractive interest rate. Car manufacturers desperate to sell off inventory sometimes offer 0% interest to those very few at the top of the FICO score tier. Instead, only charge what you can pay in full every month. If it’s only $100, then so be it. Buy groceries with it once a month, pay it on time, in full, and let that help build your credit score.
It’s your hard-earned money, and with rising prices and gas now on the increase again, your money buys less and less. Protect your financial health and refuse to line the pockets of the credit card companies.