You've got a low-interest rate credit card, pay at least your minimum due, and you've never left your credit card sitting in an unlocked car. So, you're covered, right? Wrong. Even the smartest among us are guilty of some of these common credit card mistakes. Improve your credit card IQ by avoiding these common mistakes.
1. Ignoring your rewards programWith so many credit cards on the market today, credit card issuers are working hard to get you to choose their card. Many cards offer rewards programs that, well, reward you for the money you're already spending. An industry-standard 1 percent redemption rate will typically be what you earn with your eyes closed. However, some cards can boost quarterly promotions to as high as 5 percent rebates on eligible purchases. Credit card rewards programs are generally pretty easy to manage, whether you use your credit card only a few times a year or if you pass all your monthly spending through your credit account. Rewards programs can pay off in travel discounts, exclusive perks, statement credits or even some extra holiday shopping money. Just be sure to check if or when your points/miles expire. With just a little attention to your account details, you could be earning some considerable rewards.
2. Sending your card with the serverAfter you've enjoyed a lovely meal at a nice restaurant, credit card fraud may not be the first thing on your mind. But when you hand over your credit card in that small black book and send it away with the server, you're displaying more trust than you ought to. It's estimated that 70 percent of credit card skimming takes place in restaurants. Skimming is a popular method of stealing credit card information where your card information is scanned or copied (by hand or machine). As soon as that credit card leaves your sight, you're giving dishonest employees ample time to skim your information, run your card to pay the bill and present you with the receipt with a big smile. In Europe, it's common for your restaurant server to run your card with a handheld machine right at your table, which has contributed to lower credit card crime rates. Unfortunately, this hasn't become commonplace in the states. So what's your best bet? Admittedly, this one's tough. Aside from using cash, ask to be present where and when they swipe your card. Yes, it's slightly awkward and the server may not be accustomed to the question, however, credit card theft is so common that no one will begrudge you being careful.
3. Giving your credit card to a friend"You fly, and I'll buy." It's a common enough arrangement, but when you send your credit card off with someone who is not named the name on the card, you could end up causing more conflict than convenience. First off, it's not the smartest decision to let your credit cards out of your possession since it's estimated that 25 percent of identity theft is committed by friends or relatives. Second, if there is a problem with the transaction, your credit card company's protections may not apply since only authorized users on the account should be allowed to make purchases. Last, the merchant could simply refuse to carry out the transaction, leaving you - and your Chinese takeout - in the lurch.
4. Paying lateSurely everyone forgets a due date once in a while, but paying late is not only costly in the short term (late fees can be as high as $35 and you could be hit with a high penalty APR), but it can also be very costly in the long term. Take more than 30 days past the due date to pay, and your card issuer will likely report your account to one or more of the major credit bureaus. Since your payment history makes up 35 percent of your FICO credit score, a mark like that will make your credit score take a significant hit, which translates to less-than-desirable terms for loans such as mortgages, car loans and credit cards. Avoid this scenario by taking advantage of all the technology that surrounds you. Set your smartphone with a recurring alarm, make an event on your computer calendar or consider setting up an automatic payment. Technology is fun, but it's not necessary: a paper statement, a highlighter and a fridge magnet work nicely, too.
5. Giving your card to your kidPerhaps nothing says, "I trust you," like giving a teenager access to thousands of dollars with a credit card, but surely there are better ways to create this bond and foster responsibility in your adolescent. Not only are you responsible for the balance they run up, but your credit score could also take a plunge if the balance is enough to increase your credit utilization percentage.
According to the Council for Economic Education, in 2011, only 13 states required students to take a course in personal finance. So make sure you take the lead on your child's financial education by showing them the ins and outs of savings and checking accounts long before introducing the plastic. That way, when your children do get their hands on that "magic card," they'll realize that any tab they run up is really just taking away from their holiday gift haul anyway.