12 Bad Credit Card Decisions You Make Every Day Without Realizing It
Written by Christy Bowman
May 13, 2018 |
The credit card industry is built on consumers all making the same mistake: carrying a balance and accruing interest on the amount they owe. So while it is tempting to include "don't carry a balance" as one of the 12 bad decisions you probably make with your credit card, we'll exclude it from this list, and instead dig a little deeper. We're looking for things you do with your credit card that you can change, not things like an outstanding balance that can take years to pay off.
Of course, we should not dismiss the goal of paying off your credit card balance. After all, debt obligation - particularly credit card debt - is a leading cause of sleep deprivation which in turn can cause an increase in the risk of cardiovascular disease. Americans have enough on their plate (literally) when it comes to challenges in maintaining their health, including obesity and an increasingly sedentary lifestyle. So having - and ideally achieving - the goal of debt elimination is one of the keys to improved health.
You may be making one of these 12 bad decisions literally as you read this article. These are consumer behaviors that silently ratchet up your balance without you even noticing. But with every dollar you add to your outstanding balance - particularly if you carry a balance month over month - the further you move away from the goal of getting rid of it.
12. Paying for lunch at fast food restaurants with your credit card
It is no secret that fast food companies understand the science of how to extract maximal cash from your pocket. Just look at their stock performance. But at least when you pay with cash there is an opportunity physically see the money leaving your hands in exchange for your value combo. With a credit card, you are 6 times more likely to accept an offer from a cashier to add extra features to your meal than you would if paying in cash. And really, anything you can do to scale back on how much fast food you consume will have the added benefit of limiting the damage your health.
11. Pay no attention to the items on your statement
In today's world of cyber breaches, your credit card has either already been compromised, or its on some hacker's list to be used illegally. Most credit card companies make transaction viewing access easy through online tools or mobile apps. Once you view a transaction that looks suspicious, you should alert your card issuer immediately. In fact, if you haven't reviewed your recent credit card transactions, you should stop reading right now and go and review them. And whatever you do, don't...
10. Ignore suspicious items on your statement
Although most credit card issuers are independently monitoring accounts for suspicious behavior, sometimes there are transactions they miss that only you can confirm are fraudulent. If you sit on them, it becomes increasingly difficult to argue the charge is fraud: after all, if it was fraud, why didn' you report it sooner? After your account is compromised, the last thing you want is to get into a protracted battle with your credit card issuer trying to prove fraud long after the fact.
9. Pay variable amounts each month
Getting rid of credit card debt is as much a state of mind as it is an actual act. You have to decide you want to make sacrifices in order to eliminate that debt. Setting up a recurring bill payment of a set amount to your credit card may be painful at first, but eventually, you won't even notice it. Tools like recurring bill payments are ideal in your battle against debt, because they help reduce the likelihood you will decide to hold back on dollars to spend on things like a night out at the movies when you should be putting that money toward paying off your debt.
8. Don't pay an amount you can afford
Basically, this is like saying "don't be lazy". But it is something that happens to all of us. We know we're carrying a balance on our card, and we know that we have a little extra cash in our bank account. But rather than putting some of that cash toward paying down the credit card balance, we tend to hold on to the cash instead, in case we want to spent it later. There's really no way to look at this behavior as anything except self-destructive. Even if you you pay the money to your card for one day before you make an offsetting purchase, you're still better off because that's one less day of interest that will accrue on your outstanding balance.
7. Ignore the wealth of online and mobile apps that can help manage your debt
In talking with survivors of debt, one of the common themes they relate is that they wish they'd turned to mobile and online tools sooner in their pursuit of debt freedom. Many tools today offer built-in incentive mechanisms to help encourage you to stay on track and not slip from your quest to eliminate debt. They also often offer features to help with tracking, as being aware of your purchases can in itself help promote more prudent spending behaviors.
6. Make speculative purchases using a credit card
To paraphrase Jeff Foxworthy, if you use your credit card to gamble, you might be a degenerate. Seriously, how much do you have to hate yourself to put that much risk at play? Sure, you might win once in a while. But in the fullness of time, the house always wins - and you're betting against two houses! Anything you buy with your credit card should at least provide some genuine utility considering the long tail of debt that will follow it.
5. Give your credit card details over the phone
Although the practice of making purchases via credit card over the phone is long established, it still remains a very risky way in which to use your credit card. Should someone overhear your conversation, they will obtain all they need to make an online transaction via your cardnumber, expiry date and card verification code - all data you'll need to make a phone transaction. If you do make transactions over the phone, ask the merchant if they have an online option that offers more security than a verbal transmission of your sensitive card data.
4. Share your credit card with friends
The moment you share your credit card with a friend, is the moment you assume all liability for transactions on your account - including fraudulent transactions. If you've ever shared your credit card with a friend, you likely were unaware of the severity of the risks involved. And there's always the possibility your friend is not as trustworthy as you think...
3. Accept credit increases when offered by your credit card issuer
Its tempting at the best of times to think of credit card limits as essentially free money. However, nothing could be further from the truth. Every dollar used within that limit needs to be paid back, plus interest. Cardholders with an outstanding balance need a credit line increase in the same sense as a drowning man needs to be handed a bag of cement. Credit card issuers cannot dictate you take a credit line increase if you do not want it.
2. Pay your credit card bill with a payday loan
If there is one consumer credit product with the capability to damage an individual more than a credit card, its the payday loan. No matter how much the collection agents yell at you, resist the urge to take out a payday loan to pay down your credit card. The interest charged on a payday loan would make even the most egregious credit card issuer blush. And once you get in the payday loan cycle, it can be vicious to try to get out of it.
1. Use your credit card while intoxicated
There's a reason this is #1: it happens a lot. And for some, they don't realize how much they partied until their statement arrives in the mail. Alcohol tends to reduce your ability to say 'no', so with card in hand, purchases are almost sure to follow. Coupled to that tendency is that once intoxicated, you're more likely to lose your credit card, and fail to notice it's missing until the next day. There is however, one use of a credit card while intoxicated that is not only acceptable, it is downright noble: paying by credit card for a taxi instead of driving drunk.