Common Credit Card Mistakes

Stupid Mistakes People Make: Credit Cards
Eighty percent of credit card holders have made one of these five mistakes at one time or another, throughout the history of their credit card accounts. Making these mistakes can cost higher interest rates, accumulating unnecessary fees and creating negative credit history.

Use these tips to avoid making the credit card mistakes in the future, while preserving your valuable credit card history.

  1. Never miss a payment. Missing a payment not only leaves the card holder susceptible to higher interest rates because of the bad history that is created, but it can also lead to fewer offers from the credit card company in the future.
  2. Accepting a high interest rate. Credit card companies, like many other companies are able to negotiate interest rates based on a variety of factors, including; credit history, history with the credit card company, FICO score and the risk factors associated with the account. Credit card companies often have three tiers of interest rates, therefore most of the time, there is always a lower option.
  3. Carrying a balance. Smart credit card users know that they should avoid carrying a balance on the credit card. A balance can lead to credit card debt, a lower FICO score and a negative credit history with the company. A portion of the FICO score is calculated using methods that calculate the amount of debt, to the amount of available credit. Those with multiple credit cards, close to the credit line are considered to be high risk and offered higher credit card interest rates and fewer credit card offers.
  4. Closing credit card accounts. The history that is created with credit card companies accounts for a portion of the credit score. Closing accounts that have been opened for a longer period of time are detrimental to the credit score as they decrease the history that comes with using credit. Rather than closing the account, keeping the card in a safety deposit box can reduce the amount the credit card is used, while protecting your zero balance.
  5. Opening too many accounts in a short period of time. A small portion of the credit score is accounted for inquiries into the credit file. Inquiries are made when companies are assessing credit worthiness, multiple inquiries should be avoided when possible as they not only reduce the score, but decrease the history that the accounts have been opened.
A credit card is a financial responsibility that should not be taken lightly. Using these tips, the card can be used to create a high credit score and an adequate credit history. After all, making these mistakes could cost you valuable points from the FICO Score.

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