12/21/2012 6:30 PM ET|
4 costly credit card missteps
There's also no guarantee you'll ultimately avoid the charge. If the annual fee is imposed before you remember to close the account, you will have to pay it.
To avoid any undue damage to your credit scores, opt for a credit card only if the annual fee is in your price range. If you do aim too high or mistakenly incur an exorbitant charge, Creamer suggests that you ask your issuer to waive the fee in exchange for keeping the card open longer.
"Oftentimes, they will, especially if you've had a decent history with them," she says.
Bouncing balances from one card to another
Balance transfer offers, which allow consumers to move existing balances onto a new credit card at a low or 0% introductory annual percentage rate, can certainly be helpful to someone looking to pay down debt. However, McClary says consumers need to make sure they understand an offer's terms and conditions.
"There's a ticking clock that starts once you make the transfer," he says, explaining that many offers feature retroactive interest on any balances you fail to pay down in the offer period. "All that interest is going to be heaped on there."
If that happens, a cardholder may be tempted to bounce the balance onto another credit card with an attractive introductory APR. Doing so repeatedly can generate a high number of credit card inquiries, which can negatively impact your scores. Such activity can also provide a debt-ridden consumer with a false sense of financial security.
"Don't fool yourself into thinking you've done something to pay (the debt) off," Creamer says. Instead, pick one card for your debt, and focus on your budget on making sure you pay off the balance in the introductory period.
Opening a store card to get a discount
Retailers have long offered big discounts if a customer opts to sign up at the register for that store's credit card. Taking up a clerk on this offer can leave you with a heavy liability, though.
"These cards have very high interest rates," Creamer says. If you carry a balance, a high rate will easily negate any deal you may have been given. Store cards typically also feature very low credit limits and can be used only at that particular retail chain. The limitations don't justify the ding to your scores from a credit inquiry.
Creamer says it's a good idea to skip the store credit card and opt instead for a more-traditional product that provides more-flexible spending and is more likely to bolster your scores.
If you do frequently shop at a particular retailer, ClearPoint's McClary suggests asking if the store offers a co-branded card backed by a traditional issuer or bank. These often feature more favorable terms and conditions and are accepted more widely.
For instance, one Amazon.com co-branded credit card works as a normal card but comes with a 13.24% APR, charges no annual fee and lets cardholders earn three points per dollar spent on purchases from the online retailer.
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How to keep Americans in debt to the bank...thats credit for ya.
No thanks to credit cards!!
I was shopping for a home and initially my credit score was 759. After several inquiries as to the
amount I could qualify for my credit score dropped over forty points. So the author is off his
rocker. Now I am paying down my credit cards more so I can qualify for better home.
yes my score went down over forty points after only three or four inquiries. Only reason is the
bank tried for a higher amount and would not go with that amount they told me my credit
was good but debt ratio to bill was a little to high so they tried a lower amount for price of a
home. At first the cu told me I could qualify for x amount using my income to debt but later
changed their minds so they inputed a lower price for home and still came back no. I think the
reason may be that I am in my sixties which should not matter. I always pay all bills on time.
never late. I have lived 8 years in the place Im in and never late with rent not even one day.
Over forty points with four inquiries that sucks and the credit bureaus suck.
1) Credit is some giant myth invented by Satan himself to keep mankind enslaved to corporations.
2) I had a billion dollars in credit card debt but now have zero debt because I worked hard and scrimped and saved - now I won't touch them at all as I've seen the light. I buy my cars with cash.
3) I'm unemployed and can't pay my bills and my kids eat styrofoam because I'm so poor - yet I will never file for bankruptcy because people online tell me it's evil so instead I work 47 jobs to further enrich Wall Street while I slip further behind.
Does that cover everything?
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