How Not to Become a High-Risk Credit Card User

By Stephen Fisherton on February 5, 2013

High-Risk Credit Card UserBanks watch their customers’ activity like a hawk, hoping to steer clear of borrowers who don’t intend to repay and customers who may be on the financial brink.

There are a few things that you should avoid doing whenever possible with a credit card so as not to be on the bad side of your credit card company:

1. Don’t use cash advances – A cash advance request will strike your credit card as a high-risk account almost immediately. Cash advances on a credit card are high interest, loaded with fees, and seen as a last resort for borrowing. When your credit card company sees that you’ve requested a cash advance, you may not be approved for a future interest rate cut or credit line increase.

2. Don’t pay late – Late payments can be financially ruining for people who fail to make their payments on time. A late payment usually leads to a late payment fee, higher interest rates, the revoking of special introductory offers, and a seat on the high-risk list of borrowers. Always make your payments on time, preferably a few days early, by scheduling your payments online or by requesting a direct draft from your checking account.

3. Don’t carry high balances – A high balance in a single month certainly doesn’t make you high risk; everyone has had a high-balance month. However, frequently high balances as a percentage of your total credit outstanding is a sign that you cannot afford to pay your bills and may soon become delinquent or default. Expect that a interest rate decrease, balance transfer, or credit limit increase would be declined if you carry high balances.

Customers often aren’t aware that banks engage in thorough risk management policies that are dependent on how they use their credit card. Try to stay within the credit card’s best practices, and keep balances low, make your payments on time, and refuse to use a cash advance unless there is no other option. Avoiding these three common pitfalls will keep you off the high-risk list.

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