Good credit is a great tool. A credit card may help you build good credit while better managing your monthly budget, pay for travel and plan major purchases.
However, with that power comes the responsibility to keep your card—and your credit—safe. Here are five risky credit card moves to avoid:
1. Playing the Credit Card Shell Game
Transferring your balance from a high-interest-rate credit card to a lower-rate card is generally a smart move, but don’t simply shift your debt from one card to another. Have a plan to pay off the balance. Perhaps give yourself a deadline to shoot for. Apply any extra money you’re saving on interest to the new card payment. The Credit Card Pay Off calculator can help you estimate how long it will take to pay off the balance.
2. Making Only Minimum Payments
You may think it’s easier to stick with minimum payments, but in the long run, that “great deal” purchase could end up costing you twice as much. Your credit card statement spells out how much interest you’ll be charged by paying only the minimum each month. It can be a real eye-opener. Even a few extra dollars each month can help pay off the balance quicker and reduce the total interest you pay. Plus, you’ll free up available credit for a future purchase.
3. Exceeding Your Credit Limit.
Ever feel sorry for that person in front of you at the checkout line whose card is denied? It’s embarrassing. Worse, the lender may increase the annual percentage rate charged or even close the account. According to Experian, exceeding your credit limit may also damage your credit rating if you make it a habit. Avoid these penalties by making sure you know your credit limit and checking your current card balance on a regular basis.
4. Closing Old Credit Card Accounts.
It may seem strange, but according to a consumer credit scoring agency, closing old accounts may hurt your credit rating. Here’s why: part of your score may be based on the percentage of credit you actually use compared to the amount of credit available to you. It’s called your balance-to-available-credit ratio. By closing old accounts, you reduce your available credit compared to your outstanding credit balances. Additionally, a portion of your score is based on the age of your credit history, so if you close your oldest card, you may be shortening your history once it falls off your report.
5. Not Safeguarding Your Card.
Make sure you retrieve your card from a merchant or server and put it away immediately. Before using a self-service card reader, check to see if the reader has been tampered with or has a skimmer attached. Use only legitimate sites for online purchases and use strong passwords to protect your account.
You Can Help Keep Your Card Safe
Help avoid credit card fraud by monitoring your monthly statements. Better yet, make a habit of tracking your account status online. Notify Navy Federal Credit Union immediately if you spot a suspicious purchase, no matter how small. Other security options include the ability to freeze your credit card account from your computer and receive text alerts if Navy Federal notices a suspicious transaction. If your card is lost or stolen, call Navy Federal immediately at 1-888-842-6328. For more card safety tips, read Safeguarding Your Card.