7 stupid things we do with credit cards

Suzie got a credit card when she turned 16. Yeah, that wasn’t the brightest idea ever. It was a joint credit card with her mom, who wasn’t incredibly financially-savvy herself. She frequently maxed it out (thankfully it was only $500, but still, the point remains) even though it was meant “for gas.” For gas turned into “for everything.”

Suzie’s mom is an example everyday mishaps where we can be too “trusting” to our kids. What was originally meant as a lesson turned into a disaster. Today, we’re going to look at seven stupid things we do with our credit cards.

  1. Give them to our kids. As exemplified by Suzie’s mom, giving a credit card to your kid is a bad, bad, BAD idea. Well, if you don’t set limits. A kid using a card that you can control, or one of those debit cards that have a set amount on them that you have to refill can be an awesome idea for teaching kids how to use money and budget appropriately.
  2. Use them to pay bills. Great idea, let’s pay bills with them and then pay interest, when our bills wouldn’t have interest. Now, if you’re in a jam one month, it’s okay, but to always use it is foolhardy.
  3. Transfer balances again… and again… and again… We bounce between different companies. Why? Because we’re trying to get the best rate. But, this can affect your credit score adversely. It can also tempt you- if you transfer a balance and don’t get rid of a card (which I’ve done!), you end up maxing out both of them. Speaking of maxing a credit card out, look at the next stupid thing.
  4. Use all of your available credit. Did you know that this adversely affect your credit? Yes. I remember getting my FICO score for the first time and it said “heavy use of available credit” affected my score. I had 3 cards maxed out. Always give yourself some space, because your credit availability ratio* is a big part of your credit score.
  5. Paying only the minimum. The minimum payment on your credit card is mostly interest. If you do this, watch how much… well, how little your balance goes down. It’s not much at all. You’re usually paying more interest than you are principle. Instead, pay a little more than the minimum if you can.
  6. Using them when we actually have the money to pay for things. This was a dumb mistake I made until a few years ago. I would charge stuff so I could “have the money” in order to buy other things. Now, if you are going to dinner somewhere that you know only takes cash, that’s totally understandable that you charge something earlier in the day. Just don’t make it a habit.
  7. Dispose of them the wrong way. Cut it up, destroy it best you can. Too many times we just toss them, and if our signature is on there, you have the risk of people taking it and using it. Make sure that it will be near impossible for people to get your card information.

Remember, your credit score is a huge part of your life, from getting a house to getting a car to getting good rates on other types of loans. If you’re stupid with your credit card, your credit score will reflect it for a good long time. So, be smart with your credit card and spend wisely to keep that score where it truly reflects you and your spending habits.

*Credit availability ratio is your available credit compared to your total credit. If this is equal or close to equal, it can totally kill this ratio and hurt your credit score.

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