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 program With so many credit cards on the market today, credit card issuers are working hard to get you to choose their card. Many cards offerrewards 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 server After 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 late Surely 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 kid Perhaps 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.
6. Using your credit card at the ATM Here are two words that personal finance experts would love for you to forget: cash advance. On your credit card agreement, you'll see all sorts of different interest rates and fee amounts. One of those percentages is the high rate you'll be charged for taking cash out of an ATM with your credit card. It might seem like easy access when you need paper instead of plastic, but there's generally no grace period on cash advances, meaning you'll be charged that high interest rate starting from the moment you hit "Return card" on the screen. If you're really that hard up for cash, you're not doing yourself any favors by paying interest to get it. If you can't take it out of checking or savings, maybe you shouldn't be taking it out at all.
7. Throwing away credit card numbers It may feel like identity theft is only something that happens to other people, but the trash from your home passes through many people's hands before landing in its permanent home. The amount of information that we throw out is more than enough to provide thieves with the opportunity to hijack our financial lives. To prevent against identity fraud, invest in a quality paper shredder and shred your credit card offers, credit card checks and statements, as well as utility statements. Credit expert Beverly Harzog even suggests cutting up or shredding your old credit cards and throwing half the card away one week and half the card then next week. If an ounce of prevention is worth a pound of cure, then a shredder weighing 10 pounds is a lot of cure.
8. Giving your credit card out over the phone Perhaps you're getting a jump on holiday shopping ordering through the Hammacher Schlemmer catalog, in which case, paying by credit card over the phone is certainly acceptable. However, many scams are conducted by unsavory individuals calling to tell you that your utilities are about to be turned off (they're not), or you're the winner of some great contest requiring a credit card (you aren't) if you'll just provide your credit card information. Thieves count on flustering you with scare tactics or exciting news to get you to provide any information they request. When in doubt, hang up and call the organization back using a phone number found on statements or the official website. A good rule of thumb: if you didn't originate the phone call, don't give out your personal information.
9. Paying more than you should in fees Are you experiencing exhaustion, frustration and irritability upon seeing itemized fees on credit card bills? Then you may be experiencing fee fatigue. The good news? Smart credit card companies offer products that might help you avoid tunnel vision when paying your bill. Are you a globetrotter? Get a card that doesn't charge foreign transaction fees. Fashionably late with your credit card bill? There are cards that waive late fees! There's no reason to waste money on fees. With some basic research, you can make theswitch to a card that saves you some green instead of making you see red.
Whether you're trying to save money or save your financial identity, spending a few mindful minutes on credit card savvy practices could end up saving both. Sounds like an intelligent move, smartypants.
Copyright 2016, Deseret News Publishing Company