Getting too close to your credit limit can damage your credit score.
Your credit utilization ratio is the percentage of available credit that you use. This is a significant component in your credit scores. When your utilization ratio rises too high — for example, if you have a $1,500 balance on a card with a $2,000 limit — your credit scores can suffer.
Your credit utilization ratio should be as low as possible. To maintain your score, aim to use less than 30% of your limit at all times. That way, you can be certain that when the issuer reports the status of your account to the credit bureaus, your balance will not be too near to your credit limit.
Managing credit card fraud is not as complicated as it appears.
If you’ve been putting off getting your first credit card because you’re afraid of fraud, know that credit cards actually provide more security against fraud than debit cards.
Crooks could deplete your bank account in an instant if they acquire access to your debit card information. Of course, you can report the fraud to your bank and retrieve your funds, but this will take time – and in the meantime, you may be cash-strapped.
When your credit card information is misused:
- The money at stake is the credit card company’s, not yours. So you’ll have ample of time to contest any fraudulent charges and get them removed from your outstanding amount, which is usually immediately.
- You are not required to pay. Federal law limits your liability for fraudulent credit card purchases, and credit card networks’ zero-liability agreements, such as Visa and Mastercard, generally limit your liability to $0.
- It is relatively simple to obtain a replacement card. When you contact your card issuer to report fraud on your account, they will revoke your card and send you a new one with a new number. No one will be able to make purchases using your old card number.
- If you are denied for a credit card, the issuer will explain why. Being denied for a credit card is frustrating, but you can learn from it. Federal law requires card issuers to offer you an explanation for their decision, known as an adverse action notice. For example, an issuer may claim that you were refused because your income was insufficient or you lacked a credit history. This feedback may assist you in determining how to increase your chances of approval the following time.
