Your Credit Card - Tips from an Insider

Being someone who worked in the credit card industry for years as a customer service rep, I probably encountered just about every credit card problem and issue that is out there. After helping others with their credit card issues for so long, there are many things I have learned about the proper use of credit cards, and how to avoid the problems that owning a credit card may bring. Here are a few useful tips I can pass along to people who would like to avoid credit card pitfalls:

1. Activating your new credit card - what does it mean?

When you apply for a credit card, are approved, and wish to use your card, one of the first things you will need to do is activate your card once you receive it. Many people think that activating the card means that you are accepting it, and not activating your card means that you are rejecting it. This is not true! When your application for the credit card is approved and one is sent to you, that means that you have accepted it. Activation of your card is for security purposes only; it is a way for the credit card company to make sure that the person it was issued to actually received it. When you call to activate, you will be asked certain key questions so that the credit card company can make sure it is you and not somebody who may have stolen your card. The card cannot be used until it is activated.

This does not mean, however, that any processing fees or annual fees that may be attached to your credit card do not apply until you activate. They can and do apply, and you are responsible for these charges unless you call the credit card company, usually within thirty to ninety days, and say that you have changed your mind and no longer want the card. I can't count how many people called after receiving a credit card bill to tell me that they are not liable for any fees because they never activated their credit card. If you decide that you do not want to pay processing or annual fees, you must tell the credit card company as soon as possible after receiving the card, whether you've activated the card or not. And if you use the card at all, you are responsible for fees, period. Using the card is an indication that you have accepted it and agree to all terms.

2. Cash advances - they can be costly

Many people who receive a new credit card are pleased to find out that they can get cash from their credit card account through an ATM machine or over the counter at a bank. This is called a "cash advance". Cash advances can come in handy in an emergency where only cash can be used, but the credit card owner should probably think of cash advances only in that way. There is almost always a fee for every cash advance, and it is immediate. The fees are generally a percentage of the cash advance amount or a minimum fee, whichever is greater. For example: one credit card company charges a cash advance fee of $4.00 or 5%, whichever is greater. You take out a cash advance of $200.00. 5% of $200.00 is $10.00. $10.00 is greater than $4.00, so you are charged a $10.00 cash advance fee. And remember, this charge is immediate, so $210.00 was charged to your account. This does not include any fees that may be charged by the bank, and the bank usually charges from $1.00 to $5.00 for processing the transaction, whether you get the advance from their ATM machine or over the counter. So for one cash advance of $200.00, you may be looking at up to $215.00 being charged to your account. If that isn't enough, there is usually no grace period for paying off a cash advance like there is when you use your card for regular purchases. Interest can start accruing immediately. Think of how taking out several small amounts can affect your account. Yep...ouch!

There are very few instances where a credit card can't be used instead of money, even in an emergency. Before you take out a cash advance, try to see if there is a way to use your credit card directly.

3. Read everything your credit card company sends you

As consumers we are barraged by mail from credit card companies who want us to apply for their card. Before you throw these ads out, however, be sure to look for mail from any credit card company with whom you are actually doing business. If you have a credit card through ABC Finance, then read any mail they send you, starting with the initial terms and conditions statement that you get when you first receive your card. Later, you may also be sent other things such as a notice of a change in terms, or a possible problem with your card, or just something that the credit card company needs you to know. Stay informed, or you may suffer the consequences later. It is also important to read your monthly credit card statement thoroughly. You cannot expect your credit card company to know that a charge does not belong on your account unless you inform them. That's why your charges are itemized on your statement for you to scrutinize

4. It is not "your" money

When you make a payment to your credit card company, it may take awhile to process. There are times when a payment may be held until the funds are actually received from your bank. Your credit card company may do this for various reasons that will be explained to you on your terms and agreement statement. If you are unhappy with how long it is taking for a payment to be credited to your account, it's fine to call your credit card company to ask if there is a problem, but please don't tell them that it is your money and you want it in your account now. I heard this so many times! Remember, the credit card company is loaning the money in your credit card account to you. It is not your money, it is theirs. The payment you send is money you are paying back to them on this loan.

5. Leave a buffer in your account

It is never wise to charge the entire amount that you have in your credit card account. Many people do this, and then realize that interest charges at the end of the billing period take them over their limit, and, you guessed it, then they get hit with over-limit fees. Depending on the amount of money in your credit card account, leave a "buffer" in there to absorb fees or any charges that come through that you may not have remembered. A good habit to get into is to tell yourself that you really only have about sixty to seventy-five percent of your actual credit limit. Stay within that guideline. It not only helps you avoid over-limit fees, it actually also looks good to other creditors who are looking at your credit report. Creditors like to see that someone isn't continuously maxing out their credit cards; it shows good credit judgment.

If you have any questions or concerns about using your credit card, don't hesitate to call your credit card company and ask. Staying informed and using common sense can go a long way in avoiding credit card problems, and keeping your credit on track!