warning signs of incorrect credit card usage

by Contributing Author

Credit cards have made our lives much easier. If you break down on the side of the road you can use a card to pay for towing and repair bills. If the holidays have crept up, you can use a card to buy gifts. If you want to impress someone with a gift you can use another card for that. It can go on and on, depending upon how many cards you have, and what the credit limits are.

Using credit cards to maintain your specific lifestyle is not looked down upon at all. In fact, the majority of consumers use credit cards. When things get ugly is when you use your cards to live above your current means. There are a few red flags that should grab your attention to alert you that you may be using your card incorrectly, and that it may be time to pay them off and reduce the amounts that you use them.

1. Minimum Payments-When you look at your bill the first number that pops out at you is the minimum payment that is due. If you find yourself paying this amount over and over, you may have a problem. When you pay on your cards this way you prevent late charges, but you will still get hit with the hefty interest rates that are tacked on every month. The best way to pay on a credit card is to pay off the entire balance every month, before the interest rates hit you.
2. Cash Withdrawals-If you constantly find yourself at the local ATM to pull money out off one of your cards, you may want to rethink your lifestyle habits. If you read all the fine print on your contract with the card carrier you will see that fees are charged to you every time you get a cash advance on them. It is best to avoid pulling cash out at all costs.
3. Credit Card Utilization-Believe it or not credit cards were designed to help build credit, and to help cover the costs of emergencies. They were not made to purchase that case of beer after getting off work. That is why credit card utilization (CUR) is better left under 30%. If your cards are over that amount more than they are under, you need to make some changes because it is damaging your credit score and making it harder for you to keep up with their monthly billing cycles. If you find this difficult to manage you may want to check out a credit card comparison site to apply for another one. It will allow you decrease the CUR amounts that you currently have.
4. Credit Limit Increases-You may think that turning down a credit line increase is a good thing. The less credit you have to spend, the less likely you are to spend it. And honestly, if that is your train of thought, you may want to consider getting rid of all your cards while you can. Otherwise, it is a good idea to accept the increases for two reasons. One is to increase the limits to help lower your CUR. The other is to give you a bigger cushion in case an emergency should arise.
5. Reward Point Expirations-Cashing in your reward points can help you save on some of your purchases, or they can be applied to a payment in some cases. When you let them expire, you are losing out on free money. If this is a habit that you are in, you are not utilizing your cards correctly.

The United States Debt Crisis Foundation has found that 191 million Americans use credit cards. Out of those people the average person has 2.7 cards. It goes to show that people have become dependent on consumer debt. Using credit cards is not a terrible thing if they are utilized correctly.