Remember the freedom you felt when you got your first credit card?
The convenience. The sense of self-sufficiency. The determination to not go into debt.
You probably never imagined how easy it could be to build up a balance you could potentially be paying off for years. But if you’re like the 44% of credit card holders the American Bankers Association refers to as “revolvers,” you carry at least some debt from month to month. And if you’re a typical American, according to Experian, you have an average balance of $6,354 , with an additional $1,841 on a couple of retail credit cards.
Unfortunately, many consumers are uninformed and unprepared for the responsibility of paying with plastic. Nobody makes you take a class before they hand you that first card—or the next one, or the next. But the consequences of getting in over your head can be troublesome.
What else should you know about credit cards? Here are some dos and don’ts to keep in mind:
Just because you can get another credit card doesn’t mean you should
Once you prove your credit-worthiness, you’ll likely receive other credit card offers in the mail. And pretty much every retail store you shop in will ask if you’d like to apply for their card. They’ll offer things like special discounts, partnerships, and card-holder shopping days to draw you in.
But unless the rewards are high and the annual percentage rate (APR) is low, you may choose to pass. Especially if you’re in a store and won’t have time to focus on the terms and fees in the agreement.
Remember: When you apply for a credit card, it can create a credit inquiry on your report because of the “hard pull” on your credit report. Unless your credit inquiry qualifies as “rate shopping” (see above link for details), too many inquiries in a short time period could cause a drop to your credit score.
A credit card is super convenient—if you keep your balance in check
The clock starts ticking whenever you make a purchase using your credit card. Many credit card companies will give you a few days of interest-free grace, but if you don’t pay off the balance within the grace period, you’ll start racking up interest.
If you’re reluctant to use a debit card because the fraud protections can be more limited , you could always use cash instead of credit for small and frequent purchases.
Thinking twice before just paying the minimum
It’s easy to get into the mindset that you’re on track for the month because you met the minimum amount on your credit card statement. But that amount is typically based on a small percentage of your balance (usually around 2%, or it can sometimes be a fixed dollar amount ).
Unless you have a 0% credit card rate, letting your balance carry over can rack up additional interest. Any time you’re tempted, think of what you could have had with all the money you wasted on interest: A trip home. A trip away from home. Maybe even a down payment on a home.
Now more than ever, getting in the habit of checking your statements every month
Hopefully you are already in the habit of doing a thorough review every month—billing mistakes happen, and you probably want to be sure your purchases and returns are accurately reflected. But there are other potential benefits to be had.
If you’re making any autopayments, you may have signed up for auto renewals as well. You could be paying for a service or app you don’t even want anymore.
Reviewing your charges can also help you determine if you’ve been the victim of identity fraud . The faster you move to report any problems , the better off you typically are. The Fair Credit Billing Act (FCBA) says to report unauthorized charges within 60 days after the statement was mailed, so making it a habit to check your statements as they come in—or reviewing them online at least once a month—can help keep you ahead of the game.
If you’ve made late payments or missed a payment, your interest rate may have gone up—and you could be paying a much higher rate than you thought.
There’s some useful information on those statements—for example, credit card payment rules, a warning that tells you how long it will take to pay off the bill if you send only the minimum each month, as well as how much you’ll pay in interest. It’s kind of like reading the calorie counts on menus—it may give you pause.
If you misplace a card or cards, or believe they were stolen, report it immediately
Under the FBCA , your liability for unauthorized use of your credit card is limited to $50. However, the FBCA also says if you report the loss before your credit card is used, you aren’t responsible for any charges you didn’t authorize.
If your credit card account number is stolen, but not the card, the FBCA also says you won’t be liable for unauthorized use. Credit card companies are generally quick to accommodate customers with new account numbers, passwords, and cards.
A big “don’t”: Using a credit card to get cash
Here’s another thing to check on your statement—the difference between the APR you would pay for cash advances vs. what APR you pay for purchases.
Most likely, the interest rate for advances is several points higher. If a credit card is used at an ATM, there may also be a fee. So unless it’s an unavoidable emergency, it’s probably MUCH better for your wallet to stick to your debit card or go old-school and cash a check.
Another big “don’t”: Using a credit card for purchases just to get the rewards points
Cash back and other perks make some cards more appealing than others. But that probably shouldn’t be an excuse to use a credit card if you’re not in the financial place to do so. The trade-off probably isn’t worth it if you carry a balance.
Balance transfer cards are appealing, but…
Again, if you have solid credit, you may be getting offers for 0% balance transfer cards all the time. And they can save you hundreds, even thousands of dollars, if, and that’s a big if, you can realistically pay off that balance in the designated period.
If not, you can expect the interest rate to shoot up after the introductory 0% interest period. And moving the remaining amount to yet another balance transfer card could ding your credit record, as every time you apply for a credit card a hard inquiry is pulled.
You may be able to negotiate for a better interest rate
Credit card companies sometimes acknowledge reliable payers by raising their credit limit. And that’s not all bad, because if you keep your balance low, it can improve the credit utilization rate used to calculate your credit score. But what many actually want as a reward is a lower interest rate and/or to have fees waived.
A 2018 poll for CreditCards.com found that 56% of those who asked got a lower interest rate/APR, and 70% had an annual fee waived or lowered. So it may not hurt to call customer service and ask.
Getting Control of your Credit Card Debt
Credit card debt can feel overwhelming quickly, but a personal loan may help you get things under control.
You can’t just sweep away the debt and forget it, of course. But if your financial history is solid, you could find an interest rate with a personal loan that makes your outstanding debt easier to deal with. With a consolidation loan, where you’d consolidate multiple credit cards, you wouldn’t have to worry about timing multiple credit card bills each month—you’d have just the one.
It can make sense to get a consolidation loan with a respected lender as part of an overall money management plan. Besides being known for its competitive rates, SoFi loans come with membership benefits other lenders don’t necessarily offer.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website on credit.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.