Credit Card Mistakes to Avoid

It’s easy to misstep when navigating the credit minefield, so here are some common credit card mistakes to keep in mind

Credit card mistakes can be credit killers, so needless to say, you’ll need to keep a weather eye out for them. You know the basics by now: don’t max out your cards, don’t carry too many at once, always pay more than the minimum required, choose cards with low rates….

But some common practices can have unexpected consequences, resulting in painful dings to your credit. In this article, we’ll take a look at three.

Rate Shopping

It may seem sensible to keep hunting for the best interest rate, but remember: every time you apply for anything at a financial institution, they order your credit report from one of the bureaus. And the credit bureaus don’t like it when they see too many inquiries on an account.

Now, this wouldn’t hurt you if you were, say, shipping for a mortgage. In such a case, the bureaus treat multiple inquiries as one, as long as they occur within a relatively brief period. But this rule doesn’t always apply to applications for revolving credit, because you could end up with multiple cards.

Therefore, tread carefully here. Find the best deal possible before you apply, and don’t jump ship a month later just because you find something better.

Closing Old Accounts

Just because your old Visa is boring and doesn’t offer the bells and whistles of exciting new offers doesn’t mean you should close the account. If you’ve got a long, hassle-free payment history, that card is doing you a favor, even if you don’t use it much anymore. It’s boosting your credit score.

If you close the account, the card will eventually drop off your credit report, and you’ll lose that advantage. Your credit score may drop as a result. If you really must clean out your wallet, then get rid of some of the newer, flashier cards that you don’t have a long history with.

Transferring Balances

As I’ve pointed out in previous articles, card issuers will offer you all kinds of bait and make tempting promises to get you to transfer your credit card balances to their cards. They may even tell you you’re preapproved and offer a zero interest rate for a month or two.

So let’s say you take them up on your offer, and even take the opportunity to transfer balances on several cards to your new one. Aside from the fact that you’re going to take a hit when the real interest rate kicks in, consolidating debt this way is a red flag to credit bureaus, if the debt-to-limit ratio exceeds 50%.

Like the other credit card mistakes outlined here, this one can hurt you down the line, when you do seek a mortgage or auto loan.