Have you ever heard someone talk about how they use their credit card and just had to shake your head? Though the Internet is filled with good advice on how to use credit cards and rewards wisely, some people are just not getting the message.
Of course, what’s really going on is they’re getting a different message; they’re listening to what credit card companies want them to do. And because credit card companies are out to make a profit – a profit off your hard-earned money – that is generally a very bad idea.
If you want to make your credit card company happy, follow the steps below. It’s a sure way to detonate your credit score and bury yourself in debt.
How NOT to Use Credit Cards
1. Sign Up for Every Credit Card You See
Why bother to shop for the best rewards or the lowest interest rates when you can save 10% today on your purchase of socks? And why would you want a sign up bonus to travel the world for free when you can get a cheap t-shirt instead? Don’t worry about how all these credit card applications will affect your credit score either.
2. Never Pay Your Bills in Full
Figuring out how much your purchases will cost over time is very difficult and requires the use of a calculator. It is much easier not to think about complicated things like compounding interest and just make the minimum payment. Even if it means that latte will eventually cost you $50.
3. Don’t Make Your Payments on Time
Since you are not concerned with interest and what it will do to your balance, why bother with the due date? My sister missed her due date and her baby came out just fine. How bad could it be if you miss your credit card payment’s due date? They will just add some fees and raise your interest rate. Since nobody can figure out how credit card interest works anyway, why bother worrying about your APR? Who cares if your credit score suffers?
4. Always Pay Foreign Transaction Fees
Before leaving on your vacation to Mexico, don’t figure out if your credit card has a foreign transaction fee. The 3% fee you will likely be charged must certainly go to a good cause, like bank profits or something. If you happen to read about cards that don’t have this fee, like the Capital One Venture Rewards credit card, ignore it. As an extra bonus, you can make purchases from home that are processed outside the country. This allows you to pay this wonderful fee without the hassle of getting a passport and visiting a foreign land.
5. Use Your Credit Card to Withdraw Cash
Why use an ATM card when you have a credit card? With your ATM card, you can only take out as much cash as you have in your account. But with your credit card, you can withdraw against your line of credit, which is probably much more than what you have in your bank account. Definitely disregard the high cash advance APR and any fees.
6. Pay Your Tuition with Your Credit Card
Pulling out your plastic is much easier than filling out student loan forms. The job market will be so good by the time you graduate that you will have no problem paying off all your credit card debt. Don’t worry about the difference in the interest rates between credit card debt and subsidized student loans. And don’t think about how the interest on student loans would have been tax-deductible, unlike your credit card interest. Rest assured that, if you find yourself in the habit of incurring debt, lifelong addictions are easy to break.
7. Help Out Your Friends By Co-Signing on Their Accounts
If you have a good friend who needs help, co-sign their credit card application. By co-signing their application, you are doing your part to help them get credit, even though you will be equally responsible for any debt they incur. Since you’re sure they won’t default, you don’t have to worry about paying their debt for them or having your credit ruined.
8. Use those Checks that Your Credit Card Company Sends You
Occasionally, you might have a rent, mortgage, or other payment that you can’t pay with your credit card. That is why you’re sent those convenience checks. Don’t shred them. Use them to pay your bills. Don’t worry about withdrawal fees or confusing terms like “cash advance APR.”
9. Always Purchase the Optional Insurance When You Rent a Car
Everyone knows that credit cards come with rental car insurance, but there are limitations on your card’s insurance policy that are downright silly. Rather than learn more about your coverage, just pay another $20 or $30 a day for the optional insurance offered by the rental car company. The guy behind the counter recommends it and besides, what are the chances he’s biased and gets a commission?
10. Sign Up for Your Bank’s Payment Protection Plan
By paying a fee each month equal to a few percent of your balance, your bank will help you when you are in financial trouble. If you lose your job or are injured, they will graciously allow you to accrue compounding interest on your balance without having to make your minimum payment. That is really nice of them. They must be some kind of charity as I am sure there isn’t much profit in this kind of service. What’s a few percent each month anyway?
Final Word
Follow these steps to ensure financial insolvency while helping your bank in these difficult times.
Seriously, it’s easy to be fooled by advertising schemes that want you to do exactly what’s outlined in the steps above. As with any financial decision, know what you’re doing, why you’re doing it, and if you have any alternatives. Now that you know what not to do, look at how to outsmart your credit card company, instead of the other way around.
Have you made any of the credit card mistakes listed above?
