5 Credit Card Mistakes You Want to Avoid

The following is a guest post about credit card mistakes from Odysseas Papadimitriou, the CEO of Card Hub, a Web marketplace for credit card offers.

You know how every once in a while you find yourself saying something along the lines of, “Man, I really wish I didn’t do that,” or “I wish I could go back and do that over”? That’s because none of us is perfect by any means, and we all make mistakes. However, isn’t it better to avoid making a mistake than to regret an action or wish for a do-over that you know won’t ever come? I, for one, would certainly say so.

So, without further ado, here are five of the most common credit card mistakes consumers make. Learn how to avoid them now, and you won’t wish you had a time machine like the guys from the Coke Zero commercials later.

Credit Card Mistake #1 – Grasping for Rewards

Everyone with a credit card wants to earn rewards with their spending. Rewards are fun, after all, and they make credit card use like a game, complete with points and prizes. People also just like to get free stuff. For many, it doesn’t really matter that it might take significant use to earn a free flight or a couple hundred bucks cash back; the prospect of “winning” such a prize makes a rewards credit card seem preferable to any other option.

However, if you don’t have excellent credit or don’t pay your bill in full each and every month, it really isn’t. First of all, you’re unlikely to be approved for any good rewards credit card without excellent credit. Furthermore, if you revolve a balance, you have needs that trump rewards. 

While it might not seem as flashy or special, by foregoing rewards in favor of a low interest credit card, you can lower the cost of your debt or attain excellent credit as efficiently and cheaply as possible. Yeah, you might eventually get a free flight out of a rewards card, but you’ll probably also waste more money than the cost of that ticket in interest along the way or face a much more difficult road toward higher credit standing.

Credit Card Mistake #2 – Believing in the Unlimited

Believe it or not, credit cards that allow unlimited spending do not exist. However, Visa Signature, World MasterCard, and charge cards from Chase and American Express have become some of the most popular excellent credit spending vehicles because many consumers believe the No Preset Spending Limit (NPSL) feature means these cards have no limits.

In reality, NPSL only means that your credit limit is determined on a month-to-month basis and you might incur undeserving credit score damage as a result of the way these limits are reported to the major credit bureaus. Therefore, you must not believe in the unlimited spending vehicle and must avoid cards with the NPSL feature.

Credit Card Mistake #3 – Not Making Business Personal

Yeah, we all know the cliché—that it’s not personal, it’s just business—but what if business is personal? Not much imagination is needed here because business is personal when it comes to credit cards.

According to a Card Hub study, every major business credit card issuer follows the same policy of holding individual small business owners liable for business card use and reporting usage information to their individual credit reports. What’s more, despite how closely tied so-called business credit cards are to individuals, only Bank of America has given its business cards the CARD Act protection against increased interest rates being applied to existing consumer credit card balances unless an account is at least 60 days delinquent.

As a result, small business owners have two choices: use a personal card for purchases leading to a revolving monthly balance in addition to a business card or use a Bank of America card for all company spending. These are the only ways to enjoy both the debt predictability provided by a personal card and the unique business features of a business card.

Credit Card Mistake #4 – Misunderstanding Negative Information on Credit Reports

There are only two ways for negative information to be removed from your major credit reports. First, you have the right to protest false information and have it expunged. Other than that, time is the only thing that can bring about removal.

Therefore, while companies might market services that can remove information from your credit reports, this is impossible and they are scams. Most negative information from credit card accounts remains on your major credit reports for seven and a half years. Nothing can truncate this time frame. Nothing can extend it either. Therefore, it would be a mistake to believe that anything you can do can influence the presence of accurate information on your major credit reports.

Credit Card Mistake #5 – Falling Victim to Dynamic Currency Conversion

Given that overseas travel can be pretty overwhelming, when you get to the checkout counter, you might be inclined to accept a foreign merchant’s offer to convert prices into American dollars. It’s very important that you decline any such offer, however, because merchants charge high conversion rates for the supposed service in order to profit off tourists who don’t know any better.

So instead of paying much more than is necessary for everything you buy while aboard, just familiarize yourself with conversion rates in order to get an accurate sense of the cost of goods while aboard. It also goes without saying that a credit card with no foreign transaction fees is integral to lowering the cost of foreign travel.

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