Credit cards are a unique tool in that they can be just as empowering as they can be destructive for your finances. It all depends on how you use them. And while there are almost always exceptions to personal finance rules, there are a few things you just shouldn’t do with credit cards.
1. Take Pictures of Them
Perhaps you’re excited about the new credit card you got. That’s great — but don’t take a picture of it and post it to social media. You’re just asking for someone to steal and use the information. Being a victim of credit card fraud — or any kind of identity theft — is messy and no fun, so don’t bring it upon yourself.
2. Carry a Balance to Build Credit
As far as credit cards go, this is one of the biggest myths out there. Carrying a balance on your credit card does NOT help your credit score. In fact, it can hurt. (You can see how your credit cards affect your credit by getting two of your credit scores for free, updated every 14 days, on Credit.com.)
One of the best things you can do for your credit scores is to use as little of your credit cards’ available credit as possible. Carrying a balance on a credit card almost always means the balance is growing with interest, which brings you closer to that credit limit, damaging your score. Carrying a balance when you can afford to pay the full statement amount is not only a waste of money, it could cause unnecessary damage to your credit.
That’s not to say that carrying a balance on a credit card is always a bad idea. It can make sense if you’re working on paying down debt with a balance transfer credit card, taking advantage of a 0% APR promotional financing period, financing a large purchase or using the card to cover an unexpected expense.
3. Carry a Balance on Rewards Cards
It’s easy to get caught up in the cash back, travel rewards and VIP perks that high-end credit cards offer, but the value of these cards comes down to basic math: If the costs of the card outweigh the rewards you earn by using it, then they’re not actually rewards.
Take the Capital One Quicksilver Cash Rewards credit card for example: You earn 1.5% cash back on every transaction. The variable APR ranges from 13.99% to 23.99%, depending on your credit standing (You can find a full review of the Quicksilver here). If you spend $1,000 with the mindset that you’re getting 1.5% cash back on those purchases but take a year to pay it off, you will have spent extra money on interest just to earn that initial $15 in cash back. Spending to earn rewards does not make sense in that situation.
If you do need to carry a balance on a credit card, there are a lots of good options. A balance-transfer credit card, like the Chase Slate (reviewed here), can help you save money on interest while you work to pay off your credit card debt. And if you need to make a large purchase, a credit card with a low APR can help you do that. (Here’s an expert guide to low-interest credit cards.)
4. Pay the Bill Late When They Can Afford to Pay On Time
Paying your credit card bill on time is important for two main reasons: 1) Late payments almost always incur fees and 2) a payment that is 30 or more days past due will damage your credit score. There are a number of circumstances under which paying a credit card bill late is understandable — people make mistakes, they forget things and they go through hard financial times — but there’s really no good reason to pay your credit card bill late when you know when it’s due, do not contest the charges and have the means to pay it on time.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.