Credit card pitfalls to avoid

KNOXVILLE (WATE) – Credit cards are a miracle when they provide a simple way out of a tough jam, but just as credit cards make it easy to spend, they make it easy to overspend. Using credit cards can also come with a price.

Credit cards can be beneficial if used wisely, or they can wreak havoc on your credit if handled irresponsibly. If you’re in the market for a card, first be sure you are choosing one that offers low annual fees or, better yet, no fees.

When was the last time you got a copy of your credit report and took time to review it? It’s easy to assume that your report is stellar, but all it takes is a fraudster who has stolen your identity to lower your credit score. Your credit report also may contain errors.

The Consumer Financial Protection Bureau says a few examples of errors might include having someone else’s credit information in your report or a closed account that may be reported as open or vice versa. Errors you thought had been corrected may reappear on your credit report.

The three national credit reporting bureaus, the companies that maintain your credit reports, are Equifax, Experian and TransUnion. By federal law, each bureau must provide you a free copy of your credit report once a year, but you must request it, which you can do at AnnualCreditReport.com.

A cash advance on your credit card is actually a short-term loan, and an expensive one. Unlike when you withdraw cash from your debit card, a cash advance via credit card generally costs you a steep fee as well as a steep interest rate that starts accumulating immediately. If you must use an advance, pay it off as quickly as possible.

Imagine that you’ve been struggling to make ends meet and instead of calling your creditors to see if any payment arrangements are available, you ignore the accounts. It takes just one late payment to tank your credit by as much as 110 points. You’ll also pay a late fee and your card company also might raise your interest rate if late repeatedly.

Finally, if you reach your card’s credit limit, expect merchants to reject the charge. The Consumer Finance Protection Bureau says exceeding your credit limit can cost you even more if you authorize your credit card company to approve over-limit charges. There’s up to a $25 fee the first time you exceed your limit and a fee of up to $35 if you are over your limit a second time within six months.

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