Credit Card Do’s and

Don’ts
30 smart tips for using credit cards
so you can avoid problems with
debt.

Whether you’re a college student just

starting out with credit or you’re new to the country and the U.S. credit system, it’s
crucial to know how to use credit cards correctly. The more you know, the less likely
you are to run into debt problems that can lower your credit score.

With that in mind, Consolidated Credit has put together a comprehensive list of
credit card do’s and don’ts. Following these tips can make you credit savvy.

15 Credit Card Do’s

#1: Know your payment due dates
Paying on time is the single most important thing you can do if you use credit cards.
Juggling multiple due dates can be tricky as you open more accounts. It’s important
to note that you may be able to change the due date by calling customer
service. This can help you spread payments out throughout the month so
everything doesn’t come due at the same time.
Also think about setting up either auto pay or bill payment reminders through your
financial institutions. This can help you avoid late or missed payments. You usually
set up auto pay through your credit card account. This automatically deducts the
money needed to cover your bill. If you prefer to have more control over your
payments, you can set up bill pay through your bank or credit union. Then set bill
payment reminders so you don’t miss the due date.

#2: Check your statements every month

Even if you set up auto pay and use paperless billing, don’t just ignore your credit
card statements. You should review your statements every month to look for:

1. Transactions you don’t recognize, which could be a sign of fraud

2. Statement inserts that tell you about important changes to your account, such
as changes to your interest rate
3. Estimated interest charges on your current balance

#3: Always try to pay more than the minimum

payment
Minimum payment schedules are not designed to pay off debt efficiently. In fact, the
idea is to keep you in debt as long as possible to maximize the credit issuer’s profits.
But there’s nothing holding you to the minimum payment schedule.

Always try to pay more than the minimum required payment on your monthly
statement. Paying off your debt faster minimizes interest charges. It essentially costs
you less to use credit.

#4: Know when you need to pay to use credit

cards interest-free
If you start and end a billing cycle with no balance, any charges you make are
interest-free. This means that if you pay off balances in-full every month you don’t
pay any interest charges. It’s the most cost-effective way to use credit.

Some credit cards offer a “grace period” that extends the time limit for paying without
interest charges. It’s usually about 15-20 days after the payment due date. If you
pay off the balance of the previous billing cycle before

#5: Call your creditors to negotiate lower APR

Unlike fixed-rate loans, APR on credit cards can change. Most credit cards have
variable interest rates. That means the rates change when the Federal Reserve
increases or decrease the prime rate. Fixed-rate credit cards do exist, but they are
rare.

The good thing about variable credit card APR is that it can work in your favor. You
can call your creditors to negotiate lower APR. You should do this regularly,
particularly if your credit score has improved since you opened the account. Simply
call to speak with the customer service department and tell them you want
to negotiate a lower interest rate.

#6: Only get credit cards when you have a

strategic need for them
Credit cards can be a useful tool when used correctly. But that means you should
only open a new account when you have a strategic use for it. For example, if you
travel frequently, you may need a travel rewards credit card. You may have a
specific card for gas or groceries, because an account offers rewards for certain
purchases.

#7: Keep your accounts open and in good

standing
“Credit age” is one factor used to calculate your credit score. It depends on how long
you’ve had accounts open in good standing; that means you are current with your
payments. The more old accounts you have, the more it increases your credit score.

If you open an account, then take steps to keep it open and make all your payments
on time. If your need for the account goes away, see if you can find another use for
it.

#8: Use your lowest APR credit card for big

purchases
If you make a big purchase that will take a few billing cycles to pay off, don’t put it on
a rewards credit card! It only takes about 1-2 billing cycles for interest charges to
offset any rewards you earn. So, big-ticket purchases that take time to repay should
always go on the card with the lowest APR. That way, you reduce the cost of paying
them back.
#9: Keep your payments around 10% of your
income
In general, credit card payments should take up no more than 10% of your take-
home income. If you have extra cash on hand to pay more, that’s fine. But if the
minimum payments on all your cards add up to more than 10% of the income you
bring in, you’re charging too much.

If you hit this threshold, stop charging, balance your budget and seek debt relief.

#10: Use credit card reward programs to your

advantage
Reward programs are one of the best advantages you get from using credit cards.
Cash back, free gas, airline miles, and point reward programs are just some of the
perks you can earn. And once you get used to using credit, strategically using
rewards can help you save money.

Say, for instance, you have a card that offers 3% cash back on groceries. You can
use the card to make all grocery purchases throughout the month. Then you use the
income you would have spent on groceries to pay the bill in-full. You earn 3% and
use your credit card interest-free. This is the type of strategy that uses credit in the
most effective way.

#11: Take advantage of extras, like credit score

tracking
Many credit cards offer extra features outside of reward programs. This can include
fraud prevention services and credit score tracking. Use these services to your
advantage! For example, credit score monitoring services usually cost $20 per
month or more. Getting that type of monitoring for free is a huge benefit, so use it!

#12: Understand cosigning before you get into it

This tip is especially important for college students. If you’re under 21 then you can’t
get credit without a cosigner unless your emancipated and employed. But most
college students don’t really understand how cosigning works.

A co-signer is responsible for the debt if you don’t pay, but they usually can’t make
charges on the account. This is different from an authorized user or a co-applicant
on the account. An authorized user can use the account to make charges, but they
aren’t responsible for the debt. Co-applicants mean both people can use the account
and both people are responsible for the debt.

If your parents cosign so you can get an account, don’t abuse it! If you don’t make
the payments and it goes to collections, they’ll get the calls, too.

#13: Eliminate credit card debt before you apply

for loans
Credit card debt can easily mess up loan approvals. When you apply for a loan, the
underwriter checks your debt-to-income (DTI) ratio. It allows them to make sure you
can afford the debt before they give you the loan. It measures total monthly debt
payments versus your total monthly income.

In order to qualify for a loan your DTI must be below 41% with the new loan
payments included. If it’s not, you get rejected. So, it’s a good idea to pay off some
debt before you apply for loans. This can also help improve your credit score, so it’s
easier to qualify.

 Check Your Debt-to-Income Ratio Now

#14: Become familiar with debt consolidation

before you need it
Debt consolidation takes multiple debts of the same type and rolls them into one
low-interest monthly payment. Credit card debt consolidation can be extremely
useful if you have multiple balances that you need to pay off. Consolidating at the
right time helps you avoid debt problems that can lead to financial hardship and
bankruptcy.

The trouble is that most people don’t know about options for consolidation before
they need them. As a result, you end up scrambling to find solutions when you’re
financially stressed. So, research options first to understand when to use things
like balance transfers and consolidation loans to your advantage.

#15: Know when it’s time to seek professional

help
One of the biggest mistakes that people make with credit cards is being stubborn
about asking for help. You see your bills getting higher, but you procrastinate and
avoid asking for professional assistance. The problem with this is that the longer you
wait, the fewer options you may have available.

Consumer credit counseling is designed to help people facing credit card debt

problems. Credit counselors are certified professionals that understand all the
options available to eliminate debt quickly. Don’t be shy about calling them for help!

15 Credit Card Don’ts

#1: Don’t run up your balances to the limit
This is extremely bad for your credit and your ability to manage debt. Credit
utilization is the second most important factor used in credit scoring. It measures
how much credit you have in use versus your total available credit limit. If you want
to maintain a good score, you should never utilize more than 30% of the credit you
have available. Less is always better. But maxing out your credit cards is bad and
should be avoided.

#2: Don’t use reward credit cards when you can’t

pay off the balance quickly
Everyone loves earning rewards, but sometimes we’re not smart about it. If you earn
1.5% cask back on a purchase, but you pay 20% APR for several bills cycles, you
don’t actually earn anything. In fact, it ends up costing you. If you put the same
purchase on a card with low APR, you pay less interest charges even if you pay it off
in the same amount of time.

Reward credit cards are best used when you pay the balance off in-full every billing
cycle. Don’t use a rewards credit card just to earn rewards. It’s a costly strategy that
could run you into financial hardship.

#3: Never use credit as a substitute for income

This is a huge mistake with credit cards that will put you on a slow road to financial
distress. If you use credit to cover daily expenses because you don’t have funds,
you’re only covering up the problem. And, in reality, you’re making it worse. Credit
cards are revolving debt, which means the minimum payment requirement increase
with your balances.
As you charge daily expenses, your credit card bills increase, leaving less cash flow.
That means you’ll need to make more charges to cover next month’s expenses. It’s
a downward spiral that usually ends up in bankruptcy court.

If you see this happening, stop charging and make a budget. If you can’t find a way
to balance your budget, talk to a credit counselor.

Need help balancing your budget? Talk to a certified credit couns

free debt and budget analysis.

#4: Don’t miss a payment by more than 30 days

Really, you should always make every effort to pay your bill on time to avoid late
fees. However, if all else fails, make sure to pay before your next bill is due. If you
don’t pay within 30 days of the due date, you technically miss the payment. This
results in the credit issuer reporting the missed payment to the credit bureaus.
Missed payments appear on your credit report and stay there for seven years.

Credit history is the single biggest factor used to calculate your credit score. Missed
payments have a significant negative impact on your credit score. Once you miss a
payment, you have 6 months before the creditor moves the account to charge-off
status and closes it.

#5: Avoid cash advances

A cash advance is where you use your credit card at an ATM to withdraw money.
This is not like a debit card ATM withdrawal where you only need to worry about
fees. Credit card cash advances mean you’re borrowing against your available credit
line. Not only do you pay fees, you also pay special cash advance APR on the
charge. This rate is much higher than the purchase APR you pay on regular
transactions. This is an expensive way to get cash and it’s best avoided.

#6: Don’t apply for too many new credit cards in

a 6-month period
Each time you apply for a credit card, you authorize a credit check that creates a
hard inquiry on your credit report. These stay on your report for two years, but they
count towards your credit score for six months. If you authorize too many credit
checks in a 6-month period it hurts your credit score.
So, don’t apply for too many credit cards or loans at once. This will also help you get
accustomed to managing new debt before you take on another account.

#7: Never open an account just because you

received an offer
Credit card offers are endless, even when your credit score isn’t the best. When you
have good credit, the offers pour in. But just because you receive an offer in the
mail, it doesn’t mean you need to open an account.

If you receive a credit card offer that piques your interest, go online to research the
card. You can also compare it to other similar cards to make sure you get the best
deal. Make sure you need the card and can afford to add in the bill. Then, and only
then, should you open a new account.

#8: Don’t close old accounts

People sometimes believe that you should close old accounts that you don’t use any
more. However, this can actually hurt your credit score. “Credit age” is not the
biggest factor used in scoring, but it does count. So, closing your old accounts
decreases your credit age and may also decrease your score.

If you have an old account that’s always been in good standing, find a use for it,
even if it’s a small use. If the APR is high, then call to negotiate a better rate.

#9: Don’t let accounts close to due inactivity

This follows off the point above. Old accounts in good standing are good for your
credit. But if you don’t use a credit card, the creditor may close it for you. They’ll
usually notify you before it happens. But ideally you want to avoid that potential
entirely.

It’s important to note that a closed account in good standing drops off your credit
report after about 10 years. So, the decrease in your score may not happen
immediately. But it could come at a time where you want your score to be as high as
possible. So, it’s best to keep your accounts open to avoid this type of senseless
damage.

#10: Don’t ignore fraud protection calls

Many credit cards offer built in fraud protection. If your account gets flagged for
suspicious activity, you will receive a phone call. Many of these calls are automated,
so you hear a recording instead of a live person. However, don’t hang up! It only
takes a few minutes to verify your purchases. It will list purchases and you simply
confirm that you made them. If you don’t recognize a transaction, they’ll deactivate
your account so no additional charges can be made.

Using a fraud protection service correctly could help ensure you’re not out any
money. Credit card fraud has a liability limit of $50. But if you respond promptly to
fraud verifications, you might be off the hook completely.

#11: Don’t carry balances from month to month

Some people think that it’s bad for your credit score to pay off your balances in-full.
They believe you need to carry balances over from month to month to maintain good
credit. This is a myth.

Credit utilization is better when it’s lower. A net utilization ratio of 0% is the best ratio
you can maintain. This effectively means you don’t carry any debt over. Anything
higher than 30% is bad for your credit, but you don’t get penalized for going lower
than 30%. So, pay off balances quickly and try to keep them at zero to maximize
your score and avoid debt problems.

#12: Never take on more credit than you can

afford to pay back
Sometimes people treat credit as a way to make ends meet when they don’t have
enough income. But if you can’t afford your bills now, you won’t be able to afford
another bill for debt repayment.

Always make sure you can afford debt payments before you take on new credit. As
far as loans go, lenders will help you ensure you can afford the payments by
checking your debt -to-income ratio. However, you don’t have the same safeguard
with a credit card. You can get a new card and run up thousands of dollars in debt.
But that could put you in a situation where you can’t afford your bills.

If you’re going to make a big charge or series of charges, you should check to see
how much it will increase your bills.

 Use Our Free Debt Repayment Calculator

Credit Card Information

 *Current Balance: 

 *APR (annual percentage rate): 

Payment Option #1: Minimum Payment Only

This option estimates how long it will take to pay off your credit card balance if you
plan to make the minimum monthly payments only:

 Minimum monthly payment calculation:           

Based on the information provided, your first minimum monthly payment
is $7,500.00. Note your minimum payment decreases as you pay down your credit
card balance.

Payment Option #2: Minimum Payment Plus

This option estimates how long it takes to pay off your credit card if you commit to
paying a set amount in addition to the minimum payment. With this option you
commit to paying the minimum monthly payment due plus a set amount extra each
month.

For example: minimum payment + twenty dollars

 Additional monthly payment: 

 First minimum monthly payment: 

Total first monthly payment: 

Payment Option #3: Fixed Payment

This option estimates how long it takes to pay off the credit card balance if you
commit to paying a fixed amount each month. This means you set the amount you
pay and do not change the amount as you pay your bill down.

For example: pay $300 each month

*Your fixed payment must be greater than or equal to your first minimum monthly
payment.*
 *Fixed monthly payment: 
Calculate
Note: Federal regulations require credit card issuers to disclose on your credit card statement how long it will
take to pay off your estimated balance if you make minimum monthly payments. Estimates may be rounded up
to the next $100. This debt calculator uses your actual credit card balance, so the results may vary from the
estimate shown in your credit card statement.

#13: Don’t hide from your creditors if you’re

having trouble
You shouldn’t treat your creditors like they’re debt collectors. People hide from
collectors to avoid harassment and demands for payment. So, if you fall behind on
your credit card payments, you may be inclined to do the same to your creditors.
Don’t!

Credit issuers generally want to help when you run into trouble. They don’t want
your account to be charged-off or discharged for less than the full amount you owe.
They also want to keep you as a loyal, active customer. So, they’re usually willing to
help you work things out.

If you can’t afford to pay your bills and creditors start to call, pick up the phone and
ask them to help you find a solution. They may offer forbearance, where they
suspend your payments until you can catch up. Interest rate negotiation may also be
an option, and they may set up a payment plan to help, too.

#14: Don’t assume a certain debt solution will fix

your problem
Every financial situation is different and there are a variety of debt solutions
available. Which one you need depends on your debt, credit and budget. So, you
can’t just assume that a solution that worked for a family member or friend will work
for you. You need to find the best debt solution to work in your situation.

Of course, knowing which solution that is can be tough if you’ve never faced debt
problems before. Most people hear anything about debt solutions until they need
them. So, it can be a steep learning curve as you scramble to find a solution. If you
hear about a solution that worked for someone else, research it thoroughly and talk
to a professional to make sure it will work for you, too.

Need professional help comparing debt solutions to find the right

Talk to a certified credit counselor now!

#15: Don’t settle debt if you don’t want to ruin

your credit
Debt settlement companies pay a lot of money to advertise services that “the
creditors don’t want you to know about.” These commercials often make it seem like
they have a secret, quick-fix solution that can have you out of debt today. But they
aren’t exactly up front about the effects of debt settlement and the process you go
through to settle. Here are some facts you need to consider:

1. Each debt you settle damages your credit. You create a negative item in
your credit report that sticks around for seven years.
2. Settlement is not an instantaneous process. You must set aside money
every month to generate your settlement offers. This can take up to 48 months
and you still must make monthly payments in that time.
Settlement can be a viable option in some situations. For example, if most of your
debts are already in collections and you aren’t worried about credit damage, you
may choose to settle. However, don’t use this solution if you’re trying to maintain
your credit score!