Whether you are using a credit card for the first time or have had one for years, mistakes happen. And while a credit card mistake can affect your credit scores, you don’t have to be hard on yourself. With a few changes in habits and a little time, you can start to see your credit scores heal.
Here are some common credit card mistakes and tips to get you back on track.
Miss a payment
You are in the middle of a hectic week and you are losing track of time. This is when you notice the late fees on your credit card. If this happens to you, it’s always worth calling your credit card issuer. You may be able to get the fee waived if you request it, especially if you’ve never missed a payment before. In addition, the late fees serve as a warning since your credit scores will not be affected until you are more than 30 days late, that is, when the missed payment is reported to the credit bureaus. credit.
How missing a payment can be detrimental: Not only are these late fees an added expense, a missed payment more than 30 days late can dramatically lower your credit rating, sometimes up to 100 points.
How to avoid this in the future: Create a foolproof reminder system, like email or text alerts from your credit card issuer. You can also set up automatic credit card payments every month, but make sure you have the money in your bank account to cover your bills so you don’t have to pay overdraft fees. Some cards allow you to choose your due date, so you can schedule payments with a memorable day, such as the first of the month or the day after your paycheck is deposited into your account.
Maximize Your Credit Limit
It can be difficult to avoid charging more than the recommended 30% of your total credit card limit, especially if you have a low limit to start with or are faced with an unforeseen major expense. In an emergency situation, you may need to dip into your credit limit and that’s okay. But if you regularly max out your card, you potentially damage your credit over time.
How Maximizing Your Credit Limit Can Be Harmful: Your credit usage, or the total amount of your available credit that you charge, is a factor in calculating your credit scores. Generally speaking, the lower your usage, the better.
How to avoid this in the future: Reduce the use of your credit card for every purchase. You can use your credit card for some expenses each month, then use cash or your debit card for everything else. If your credit limit is low, call your issuer to find out if you would be eligible for an increase in your credit limit. Update your card issuer on your earnings if they increase, as this may help you qualify for such a rise.
Spend more than you can afford to repay
Compared to handing over all the money you have in your wallet, paying with a credit card doesn’t feel like you’re spending real money, so you can spend more. It can lead to a rude awakening when your credit card bill comes in, especially if you don’t have enough in your bank account to cover it.
How going over budget can be harmful: By design, credit cards can lock you into an expensive cycle of debt because you can charge up to your credit limit, pay only a small portion of your bill, and then top up until the end of your bill. limit next month. After a short time, your debt can reach thousands of dollars.
How to avoid this in the future: Don’t just put the plastic back without a second thought. Check your balance several times throughout the month, and if you’ve got a big expense coming up, plan it by putting some money aside to pay it off. If you’ve already overspent, switch to cash or a debit card while you pay off the debt. Budgeting can help you feel more in control of your money.
Close a card account without a policy
Thoroughly cleaning your wallet might seem satisfying, but you don’t need to take out the scissors just because you don’t use a card that often anymore. Sometimes closing a credit card is the right decision, but it can affect your credit rating. For this reason, you may want to consider ways to keep the account open.
How damaging closing a credit card can be: Closing a credit card that you have owned for a long time can reduce the average age of your credit card accounts. When it comes to your credit scores, you better get older. Plus, closing a card means a lower total credit limit. If your spending stays the same, it increases your credit usage.
How to avoid this in the future: There are good reasons to close a card, such as not wanting to pay an annual fee on a card you no longer use. But you may have other options, such as downgrading the card to a card with no annual fee, which allows you to keep the account open for less. Make sure to use this card several times a year to keep the account active. If it stays in a drawer for too long, the issuer may close the account due to inactivity and you will be faced with the same result as if you had canceled the card yourself.
Pay your credit card statements without looking
While you can put your credit card payments on autopilot, take an active role in monitoring your account as errors can occur. You may have no idea, unless your credit card company contacts you about possible fraud.
How ignoring credit card statements can be damaging: Suspicious charges, even small ones, can be the first sign that your credit card information has been stolen. By law, you are not responsible for more than $ 50 in fraudulent charges, although most cards waive your liability entirely. However, you must report the fraud. If you regularly pay your credit card bill without reviewing the charges listed on it, you may be paying expenses that someone else has accrued on your behalf.
How to avoid this in the future: Check every credit card statement before you pay it. If you’ve set up automatic payment, create a reminder to review your account each month. Whenever you see an unusual charge, call the number on the back of your card to report it. The credit card company will issue you a card with a new number.
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Sara Rathner writes for NerdWallet. Email: [email protected] Twitter: @sarakrathner.
The article How to Bounce Back from a Credit Card Mistake originally appeared on NerdWallet.
