The 5 Worst Credit Card Mistakes

Credit cards are small plastic banks that you can put in your pocket and take pre-authorized loans from as needed until the credit limit is reached. There's already something disturbing about having a bank in one's pocket, but it gets worse if you make mistakes with your credit card. The worst credit card mistakes can cost money, lead to identity theft, and contribute to financial ruin, especially when more than one of them happens at the same time.

1. Losing your card

Losing a credit card puts your debt into the hands of the unknown. Not knowing you've lost your card makes it difficult to report the card lost or stolen. If it's not bad enough losing a credit card in a public place, try losing your credit card at a crowded public place where there's dubiousness and alcohol involved. It's possible there's some chance it won't be there when you get back and you might not realize its gone until the next day after you've bought 100 people free drinks without even realizing it.

2. Deciding bills can wait

Credit history makes up more than a third of your FICO score. Not taking credit card bills seriously means losing a proportional percentage of your credit score as time goes by. This is a credit card mistake as the longer bills wait without payment, the lower your credit score becomes, and the higher your interest rate might go on new credit. If the credit card is never paid and becomes an unpaid collection account, it usually goes on a credit report as unpaid delinquent debt which can have a medusa affect on lenders.

3. Authorizing and using overdraft

Credit cards are overdrafts in the sense the money isn't actually yours and they're generally supposed to be used as a short-term alternative to cash. Authorizing overdraft on a credit card is a credit card mistake because its like asking for overdraft protection on an overdraft card because credit cards can be used to bridge gaps. Once you allow a credit card issuer to provide you overdraft protection, overdraft fees kick in, your debt to credit ratio can rise, your budget can get thrown out of whack and your credit score can go down.

4. Maxing out lots of credit cards

It's not really a good idea to have more than three credit cards, maxing all three out is even less wise. Credit cards aren't collectible toys, and in addition to being like little plastic pocket banks, they're also like miniature candy machines. A few calories here a few calories there; it all seems manageable until the candy's all gone and you've mysteriously added 5 pounds to your weight. In other words, having lots of credit cards, and then maxing out on them is a credit card mistake because it increases the chance of transaction exposure, applying for more credit cards, and can also lower credit score while reinforcing uncontrolled spending.

5. Not shredding credit records

Credit card statements, applications, pin numbers, and correspondence are all important, but they also all leave a paper trail. Not shredding or controlling old credit card records is a bad credit card mistake because it can lead to accumulation of unnecessary financial records, and also increases the chance of identity theft. Calling the credit bureau to freeze credit when no additional credit is needed prevents future applications being mailed in your name and reduces credit records. Going paperless is another way to avoid paper credit records and shredding.