Congratulations! You've just received a brand new credit card with a huge limit. Don't get too excited yet. Before you go out on that dream shopping spree, There are a few important things you need to know now. The last thing you want for the future is a bad credit situation. Maybe this new card is for "emergency use only." If that's the case, it is important to define what an "emergency" is. An emergency might be an exploding pipe flooding the basement. Other people might consider the Annual Shoe Blowout at the Super Shoe Warehouse to be an emergency. Regardless, decide the specific purpose of your card and stick to it. Maybe you applied for a new credit card to improve your credit rating, which is a great idea if you're young and planning to make a major purchase, like a home, someday. If so, remember to use your card in a way that helps your efforts, rather than hurting them. Paying your entire balance on time each month is an excellent way to maintain a strong credit rating. This will demonstrate that you are financial responsible. It will also help you avoid those high interest fees. To avoid accumulating debt, write a budget and stay committed to it. Only spend what you can afford to pay off, without having to rely on your savings to do so. Some individuals feel compelled to check their credit report and score on a monthly, weekly, or even daily basis. While it is a good idea to keep track of your report and score in case of any fraudulent activity, make sure you do it responsibly. Using one of the three major credit bureaus is the best option. Checking through a credit lender repeatedly can actually HURT your score. Avoid doing that unless you're actually applying for credit. A common credit mistake is using credit cards, instead of savings, to pay the bills on a routine basis. This mistake leads to hefty, long-term debt. Avoid it like the plague. Your purpose in maintaining a savings fund is to have a nest egg for the future, or something to fall back on during economic hardships. Credit cards come in handy for shopping no matter where you are. The internet has generated a global shopping market. It's easier than ever to find whatever you want and have it sent directly to your home. When using your card for online shopping, make sure that the site you're using is safe and secure. Being careful will help you avoid fraud, scams, and identity theft. These situations can irreparably damage your credit. Once you've learned how to use your credit card wisely, you'll be able to maintain a good credit score and stay out of debt easily. Now you're ready to get out there and start buying!
While that might seem OK to you - because you don't want to use the card and go farther into debt - it really isn't OK. Your credit score is compiled from many factors, and one of them is the amount of unused credit you have available to you.
Thus, when a credit card account is cancelled, your available credit goes down - and so does your credit score.
The best thing to do - take that card out and use it now and then. And when the statement arrives, pay it in full. That will keep the card active without costing you any money in interest payments. So use it for something you would have purchased anyway - such as groceries or gasoline.
According to a Reuters article in December, the credit card industry plans to cut more than $2 trillion in credit lines over the next year and a half - that's a 45% decline in the total credit available to consumers.
One reason credit card companies want to close your dormant accounts is that it costs them money to keep an account on the books - and if you aren't spending any money, that means they're going in the hole by keeping your account open.
Don't give them an excuse - use it just often enough so you don't lose it.
Identity theft is a second reason to use your card...
Most of the time, if you have no current balance and you had no balance the previous month, your credit card issuer won't send a statement. Thus, a person using your identity would have no problem in contacting the card issuer, having "your" mailing address changed, and using the card until the credit limit was reached.
Since the bills would be going to a different address, and since you wouldn't be expecting a bill for a card you weren't using, this could go on behind your back for months.
You wouldn't know that you had unpaid accounts until you attempted to get credit yourself and learned that your good credit wasn't so good any more.
That's why credit experts advise that you regularly check your credit report and/or enroll in a credit alert service.
Since identity thieves like to zero in on those unused accounts, use your card at least every other month, so the use shows on your credit report. Doing so will make that credit card less attractive to would-be thieves.
Both Mary Bush & James Exum are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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