The Seven Deadly Sins of Credit Card Use
Posted on May 30, 2013 by Michael Martin Leaño
Your credit card is like a double-edged sword. When used sensibly, it makes life so much easier. But if you indulge in the Seven Deadly Sins of credit card use, then you're looking at crippling debt, a really low credit score, and a massive headache that will persist for years to come. To keep you out of financial trouble, we'd like to bring these Deadly Sins to your attention:
Greed: Buying something you can't afford
Having a credit card can fool you into thinking that you can really afford something. Suddenly, what would take you months to save up for can be purchased in an instant with your new credit card. To determine if you really can afford something, factor in the interest in your purchase price and the length of time that it will take to pay it off, and see if the item is really worth it.
Gluttony: Maxing out your credit card
With companies aggressively advertising products and services through sales and promos, you can be tempted to unleash the spending monster within. In addition, events such as birthdays and gatherings can further compel you to spend; even more than what you would allot for if you were to pay in cash. After all, with a credit card, you don't have to pay for it now, right?
Find out what can trigger your spending. In addition, it's best to keep a record of your purchases to see if you're too close to your credit limit, and not only that, if you're too close to what you can comfortably pay off.
Envy: Using your credit card to match other people's lifestyles
You don't necessarily want to keep up with the Beckhams, but we can sometimes feel the need to keep up with the people with which we closely associate. Hearing about a friend brag about a Caribbean cruise that he recently went on or a neighbour inviting you over for a barbeque to show off his new grill can urge you to purchase something similar.
Before you do that, ask yourself if it is something you really want or need or is it as a result of comparing your lifestyle to another person's lifestyle.
Sloth: Not paying your credit card on time
There are many reasons for not paying a credit card bill on time. You may have forgotten the due date, you bought something you couldn't afford, or there were other unforeseen expenses. Or deep down, maybe you were really just feeling lazy that day. But alas, if you miss your due date, you'll have to deal with late payment fees, higher interest rates, lower credit score ratings, and incredibly persistent calls from your credit card provider.
Wrath: Cancelling all your credit card accounts
Frustrations with the effects of poor credit card habits can lead you to swearing off on all credit cards. However, don't let your wrath cloud your judgement. Cancelling one of your credit cards can lower your credit score since it would increase your credit utilisation ratio, which is bad. Getting rid of several will hurt your credit score significantly.
Pride: Not checking your credit rating
You probably think that since you're a smart and responsible consumer, you don't need to check your credit rating. You pay your credit card promptly and settle your balance in full every month. You're a model customer! Here's the thing: despite your good habits, you still need to regularly get a copy of your credit report because it's entirely possible that it has errors.
Like what? It could be anything—maybe the credit limit had one less zero at the end. Perhaps one entry was doubled. Or worse: someone's already stolen your identity and you don't even know it. the lesson here is that you swallow your pride and get your credit report regularly to protect yourself.
Lust: Applying for too much credit at once
Once you enjoy using credit card to the point of maxing out your credit limit, the temptation to apply for a credit limit upgrade may be too hard to resist. Don't fool yourself into thinking that small upgrades to your limit have little effect on your spending habits, or that it's good to have that extra credit limit for emergencies. You'll find that you'll be spending more and everything suddenly becomes an "emergency".
What is more difficult to manage would be credit card call centre agents calling you to offer an upgrade, or worse yet, being automatically given an upgrade–sometimes without you realizing it. It's best that you know your appropriate credit card limit and stick to it.
