First of all, the good news is: since the beginning of the coronavirus pandemic, we as a country have reduced credit card debt.
Between December 2019 and May 2021, Americans’ credit card balances decreased by $157 billion. U.S. Federal Reserve. Yeah us!
Now, the bad news is: if you don’t use a credit card, the whole invisible and inadvertent may end up getting you into financial trouble—think about the reduction in your credit score due to inactivity and potential fraud.
To protect yourself from the danger of not using a credit card, please be aware of these potential consequences.
3 ways an unused credit card can harm your finances
Since we can’t go out to eat or shop often, we reduce the excuses for accumulating more debt on our credit cards. Although paying the balance is a good thing, if you don’t take out the plastic often, you may have shifted your thoughts to other more direct financial issues.
Follow our strategy to avoid these three financial pitfalls that follow no Use your credit card.
1. Your credit score may drop
If you still have a balance, you should continue to pay monthly. If you finally pay off your credit card, you have every reason to celebrate. Just do it responsibly (ie don’t spend huge fees on your card) Debt-laden). Then continue to use your card.
If you rely on a credit card to build a credit score, it is important to continue to use your credit card.Maintaining responsible spending and payment plans—not closing accounts—can affect three Five factors that determine credit score:
Payment history, accounting for 35% of your score.
Credit utilization rate, accounting for 30%.
The length of the credit history accounts for 15%.
Keeping your credit limit open helps your credit history, but it will have a greater impact on your credit utilization-the total available credit you are using.
For example, suppose you have two credit cards, each with a credit limit of $1,000. You paid off one, but you still have a balance of $300 on the other. If you keep both cards open, your credit utilization will be 15%. However, if you close the credit card that has been paid off, your credit utilization rate will soar to 30%.This Higher utilization, The greater the negative impact it has on your credit score.
However, even if you don’t plan to close your credit card account, putting all the cards you don’t need in the drawer may affect your credit payment history-which is also an important factor in your credit score.
Instead of spending a fortune, keep a manageable monthly subscription on your credit card—think Netflix or Spotify—you can promise to pay it off every month. As far as your credit score is concerned, the amount you pay off is not important-what matters is that you pay off your balance on time every month.
2. Your credit limit may be reduced
Everyone is feeling the effects of the pandemic, including credit card companies. To reduce the likelihood of them getting into trouble due to debts that borrowers cannot repay, many people are cutting credit lines-less credit means less responsibility.
Unfortunately, if you monitor your credit limit irregularly, this reduction may come at your expense-and in an unexpected and unfortunate way:
If you try to charge for items that exceed the new credit limit, you may be charged for the excess.
If the lower limit increases your credit utilization, your credit score may be affected.
By scanning your credit card statement monthly or checking your limit online, if your credit limit is lowered, you can avoid being overcharged.
If you do notice a reduction in your credit limit, please click here Four repair methods.
3. You may become a victim of fraud without your knowledge
Personal story: I have four credit cards, but I only use one often. Every Monday morning, I enjoy my coffee while checking my card app to learn about recent transactions. (I swear I am more interesting than it sounds.)
Recently, two expenses were shown on one of my cards, namely gas stations and fast food restaurants. Neither will arouse the suspicion of my card issuer, but because I know the card is safe, I can immediately report the card theft.
If I just assume that my cards are safe because I didn’t use them, I might get a nasty surprise at the end of the month — or worse, if I didn’t bother to open my statement and get emptied there Late fees.
Moral of the story: Even if you don’t use them, check your credit card account regularly to prevent fraud and theft.
If you have not used your card in the past few months — or you avoided checking your balance — you may not closely monitor transactions.
go through Download the official app For each of your cards, you can immediately access your card information, including customer service contacts, and tips for cards that may not be in your wallet but still require your attention.
Once you have the opportunity to spend money again, you can use these lessons to avoid re-forming bad habits.
Tiffany Wendeln Connors is the full-time writer/editor of The Penny Hoarder.read Her biology and other work is here, And find her on Twitter @TiffanyWendeln.