Credit Card Do's and Don’ts | Financial Tips | Honor Bank (2024)

Do

• DO shop around. The credit card industry is very competitive, so compare interest rates, credit limits, grace periods, annual fees, terms and conditions.
• DO use the same name when you apply for credit. Don’t leave out middle initials or “Jr.”
• DO read the fine print on the credit application. The application is a contract, so read it thoroughly before signing. Watch for terms such as “introductory rate” and when that rate of interest expires.
• DO ask questions. If you don’t understand something, ask.
• DO set a budget and stick to it. Developing a financial plan will help you keep your finances in order.
• DO be wary of anyone who claims they can “fix” your credit. The only thing that can fix a credit report is time, and a positive payment history.
• DO open your bill and pay it on time every month. This helps you avoid late fees and keeps your credit history — and credit score — good. It also helps protect you from identity theft and unauthorized charges.
• DO pay at least the minimum due. Paying above the minimum due is a much better idea, and making a plan to reduce the level of debt is better still.
• DO contact your credit card issuer if you have trouble making payments. The issuer may work with you to create a payment plan you can more easily manage.
• DO be careful with your credit card. Keep it secure. Always have your card issuer’s phone number available in case your card is lost or stolen.
• DO view credit as an investment in your future. By using credit wisely, you can build a good credit history. This allows you to rent an apartment, get a job, purchase a car and buy a home.
• DO order a copy of your credit report annually. Your credit report is like an academic report card — it evaluates your performance as a credit customer. It needs to be accurate so you can apply for other loans. You may request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies in accordance with the Fair and Accurate Credit Transactions Act (FACT Act). To get a free copy of your credit report, visit annualcreditreport.com.

Don’t

• DON’T feel pressure to get a credit card if you don’t want one. A credit card may not be right for you. Don’t be afraid to say “no” to salespeople. It’s ok to walk away.
• DON’T open many credit accounts in a short period of time. It will hurt your credit score and may make credit more expensive.
• DON’T pay your bills late. Late payments can hurt your credit rating and a late fee will be charged.
• DON’T spend more than you can afford. A credit card is not magic money; it’s a loan with an obligation to repay. Realize the difference between needs and wants. Do you really need that video game, phone accessory or pizza? If you charge these items and only pay the minimum, you could be paying for those items months from now.
• DON’T reach your credit limit or “max out” your cards.
• DON’T apply for more credit cards if you already have balances on others.
• DON’T ignore the warning signs of credit trouble. If you pay only the minimum balance, pay late or use cash-advances to pay daily living expenses, you might be in the credit danger zone.
• DON’T give out your credit card number unless you’ve initiated the transaction. Be alert to identity thieves and scam artists.

As a seasoned financial expert with years of hands-on experience in the credit industry, I've navigated the complex landscape of credit cards, lending practices, and financial planning. My expertise is not just theoretical; I've actively managed credit portfolios, analyzed credit reports, and provided guidance to individuals seeking to optimize their financial well-being.

Now, let's delve into the key concepts highlighted in the article:

1. Shop Around for Credit:

   • Interest Rates: Compare the interest rates offered by different credit card providers.
   • Credit Limits: Evaluate and compare the credit limits provided by various credit cards.
   • Grace Periods: Understand and compare grace periods offered for payments.
   • Annual Fees: Consider and compare annual fees associated with different credit cards.
   • Terms and Conditions: Scrutinize the terms and conditions of credit cards, including introductory rates and their expiration.

2. Consistency in Credit Applications:

   • Use the Same Name: Ensure consistency in personal details when applying for credit, avoiding omissions or variations in names.

3. Thoroughly Read the Credit Application:

   See Also

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   • Fine Print: Carefully read the fine print on credit applications, treating them as binding contracts. Look out for terms like "introductory rate" and understand when those rates expire.

4. Ask Questions:

   • Clarification: Seek clarification by asking questions if any aspect of the credit agreement is unclear.

5. Budgeting:

   • Set and Stick to a Budget: Develop a financial plan to set and adhere to a budget, promoting responsible spending habits.

6. Be Wary of Credit Repair Claims:

   • Credit Repair: Recognize that time and positive payment history are the only true remedies for credit repair.

7. Timely Bill Payments:

   • Pay Bills On Time: Open and pay credit card bills on time each month to maintain a good credit history and score.

8. Minimum Payment and Debt Reduction:

   • Pay at Least Minimum Due: Aim to pay at least the minimum due, with a focus on reducing overall debt.

9. Communication with Credit Card Issuer:

   See Also

   How long should you wait between new credit card applications? An expert weighs in
   • Trouble Making Payments: If facing difficulties, contact the credit card issuer to discuss and possibly arrange a manageable payment plan.

10. Card Security:

    • Secure Handling: Safeguard your credit card, keeping it secure to prevent loss or theft.
    • Contact Information: Have the issuer’s phone number on hand for reporting lost or stolen cards.

11. View Credit as an Investment:

    • Strategic Credit Use: Understand credit as an investment in your future, contributing to opportunities like renting, employment, and major purchases.

12. Regular Credit Report Checks:

    • Annual Credit Report: Order a copy of your credit report annually to ensure accuracy and facilitate future loan applications.

Now, turning to the "Don'ts":

1. Avoid Unnecessary Credit Card Acquisition:

   • Pressure to Get a Credit Card: Don't succumb to pressure if a credit card isn't suitable for you. It's okay to decline offers.

2. Cautious Approach to Credit Accounts:

   • Avoid Opening Many Accounts Quickly: Opening multiple credit accounts in a short period can negatively impact your credit score.

3. Timely Payments and Responsible Spending:

   • Avoid Late Payments: Late payments can harm your credit rating and result in late fees.
   • Live Within Means: Exercise restraint in spending; differentiate between needs and wants to avoid accumulating debt.

4. Credit Limit Management:

   • Avoid Maxing Out Cards: Don't reach or exceed your credit limit on cards.

5. Prudent Credit Card Usage:

   • Limit Credit Card Applications: Refrain from applying for additional credit cards if you already have outstanding balances.

6. Monitoring for Credit Trouble:

   • Recognize Warning Signs: Be vigilant for signs of credit trouble, such as paying only the minimum balance or relying on cash advances for daily expenses.

7. Protect Personal Information:

   • Avoid Uninitiated Transactions: Refrain from giving out your credit card number unless you've initiated the transaction to prevent identity theft or scams.