In today’s world, you need a credit card. 

From booking hotel rooms, rental cars, and flights, you generally will need a credit card at some point in your life. Of course, banks and credit lenders are more than happy to extend that credit to you – but you need to make sure you’re reading the fine print. Good credit hygiene includes informing yourself of all the risks and responsibilities. 

As promised, here are three credit card mistakes to avoid:

• Carrying a balance month-to-month. 22% of Americans had a balance thinking it would increase their credit score. This is a huge myth. In reality, a high balance month-to-month hurts your credit score and can end up costing you big money.
  
  If you carry a balance, you’ll have a higher credit utilization rate (the amount of debt you have compared to your available credit). Your balance can also get expensive because of interest charges. And though you may have a cashback credit card, these “rewards” don’t mean anything if you’re getting eaten alive in interest.

• Neglecting to review your billing statement. It’s necessary to check that the transactions listed on your credit card statement are accurate so you can take action on errors or double charges. Remember, most credit card companies will only resolve charge disputes within a specific time frame, typically a maximum of 90 days after the initial charge! It’s a great idea to check your transactions once a week to ensure there’s no funny business.

• Closing a credit card. The average length of time you’ve had credit is just one factor making up your credit score. When you close a credit card, the average length of your credit history is affected. For example, if you have a card that’s eight years old and a card that’s two years old, you’ve had credit for an average of four years.
  
  If you close the older card, your age of credit decreases to 2 years. It’s generally not advised to close a credit card, especially your oldest. Having an established, aged credit product is important for your credit standing.
  
  However, there are times when it can make sense to close a credit card. For example, when you’re charged an annual fee your card’s benefits don’t offset.

There are other pitfalls to avoid, which we will touch on in future emails, but these are the three biggest bullets to dodge. We want to look out for your financial wellbeing and educate you on ways to protect and grow your money. It’s what we do! Why not reach out to us today at 513-563-PLAN (7526) or here and we can check your financial health and set you on the straight path!

Regards,
Nikki Earley, CFP®