Having a reliable credit card is absolutely necessary for many people who either need an emergency payment solution in the event something pops up, or as a solution for those who make frequent purchases and wish to receive some form of cash back or compensation as a result.
Unfortunately, many people make several mistakes during the application process and while holding the cards themselves. Avoiding these mistakes will not only make it easier for you to access credit, but it also will prevent your credit score from suffering. So, what are some of these stupid decisions and how do we avoid them?
Do Not Engage in Application Blitzes
Each time you fill out an application for a credit card or rewards card, your credit score is accessed and this information is recorded. If you do this too much (with ‘too much’ being defined as more than a couple of times in a 3-6 month period), then other credit issuers will be able to see this information and will take notice. Credit card companies are far more likely to turn down someone who is pinging lists of requests for credit, so the best way to avoid this situation is to obtain a credit report prior, understand what is reasonable for a person with your credit score and make one or two smart applications for credit cards that are within your reach.
Don’t Let Rewards Fool You
Many people get lured into signing up for a credit card because of the promised benefits. Sometimes, however, these benefits are not as great as they seem. In many cases, there are limits such as a maximum payout in a given period, or on which items you receive credit for cash back or other perks. What can be even worse is the habit of using the card for such a purpose and then not paying the bill each month. Cash back is only worth it if you are paying off the balance each month; if you are using a cash back card as actual credit and not covering the balance each month, then the interest will ultimately more than cancel out the purported benefits and rewards.
If You Can’t Spend Responsibly, Get Rid of Your Cards
Having a credit card for emergencies is important, but having cards laying around when you do not need them is a bad habit. It can be much worse if you are not capable of controlling your spending. This is a delicate subject for many, but it is ultimately up to each person to decide whether their spending habits are optimal for having multiple cards. Do you usually rack up large balances or continuously have debt on all the cards you have? Even if you do not have credit cards currently, it is probably not the best idea to procure one if you constantly find yourself short on cash.
By avoiding pinging lists of credit reports, keeping your credit cards current and knowing your limits, you can have a great experience with credit cards while building your credit. Otherwise, you may find yourself in for a rude awakening. Credit cards are a privilege and responsibility, so be sure to treat them as such.