7 Times You Should Avoid Using Your Credit Card

Loan Lawyers, LLC | October 25, 2021 | Credit Card and Debt Defense

Credit card debt in the United States has reached an all-time high. As of May 2021, credit card debt has reached nearly $1 trillion, the highest ever in American history. Clearly, people are using their credit cards more these days and for many, the burden of the debt becomes too great to bear. They then find themselves facing harassing phone calls from debt collectors, and they may even have a lawsuit filed against them.

To avoid these consequences, it is important to remember that just because you have credit available, and just because you see something they would like to buy, does not mean you should whip out your card and rack up debt. There are times when it is better to leave your card in your wallet, or at home, instead. Below are seven times when you should avoid using your credit card.

You Cannot Afford to Pay Off the Balance

Most importantly, you should never use your credit card if you cannot afford to pay the full balance when it is due. Essentially, if you do not have the cash available to make a purchase, you should not use your credit card, either. Doing so will cause you to incur late fees and interest, which will only add to your overall debt and make it harder to repay. Allowing a large balance to accumulate on your credit card will also lower your credit score, as the creditor will report the unpaid debt to the major credit bureaus, such as TransUnion.

Additionally, if you use your credit card knowing that you cannot repay the debt, you could technically be charged with fraud. Some creditors claim you acted fraudulently so that the debt cannot be discharged if you file bankruptcy. Never use your credit card if you know you cannot afford to take on additional debt.

You Do Not Know How Much Credit is Available

Decades ago, it was not uncommon for borrowers to opt into over-the-limit protection but since the CARD Act of 2009 was passed, fewer are. It is actually better to opt-out of this protection because if you try to make a purchase that would put you over the limit, the transaction is simply declined and you will not incur any additional fees or expenses.

However, if you have opted in for the over-the-limit protection, the creditor will allow the transaction to take place, even if it puts you over your credit limit. In exchange, they will charge you a hefty fee that will only add to your balance and make it more difficult to repay a debt. You could also trigger a higher interest rate if you go over your credit limit, and maxing out your credit card will also negatively affect your credit score.

Always make sure you know how much credit you have available before using your card. Today it is very easy to do, as most creditors will have an app that allows you to check your limit very quickly.

You are Applying for a Mortgage

Mortgage lenders will look at a number of things when you are applying for a loan. They will consider your credit utilization, which is the percentage of the credit card balance you are using. They will also look at your debt-to-income ratio, which is how much of your income you need to repay any debt you are carrying. If you carry a high credit card balance, it means you have to pay more every month to repay the debt, which increases your debt-to-income ratio.

Do not make big purchases when you are getting ready to apply for a mortgage. Instead, wait until at least after the closing process is complete so any new debt will not affect your application. Even better, wait a few months until after the closing process so you can get accustomed to paying your mortgage, and any upkeep expenses.

You Just Want to Feel Better

Sometimes when a person has had a bad day or has just been feeling blue for a little while, they will go shopping to make themselves feel better. As long as this does not end up becoming a temporary fix for larger problems, there is no problem with this, unless you are using a credit card to do it. Splurging on yourself once in a while is okay, but you do have to make sure you can afford to repay the balance at the end of the month. If you turn to shopping every time you feel down, start looking for healthier ways to feel better, such as journaling, exercising, or gardening.

You are Already in Debt

The simplest rule for using your credit card is that you should not if you are already in debt. Adding debt on top of debt is a surefire way to get in over your head. If you do not know about all of your debt, take out all of your statements, add up the total debt, and develop a strategy for paying it off.

When You are Intoxicated

You are more likely to make bad decisions when you are intoxicated and not thinking clearly. If you plan on going out for drinks with friends, carry cash on you to ensure you do not get in over your head. And if you are having a few drinks at home, resist the urge to shop online.

You Do Not Trust a Person or Device

Credit card skimming is a real problem and largely occurs at gas pumps and ATMs. Sometimes, a person that is given a credit card, such as a restaurant server or store clerk, may also pass a credit card through a skimming device in what would otherwise be a legitimate transaction. You will not ultimately be responsible for these charges, but they are a pain to deal with. If you ever do not trust a person or device, do not use your credit card and use cash instead.

Call Our Debt Defense Lawyer in Broward County if a Lawsuit has Been Filed

It is all too easy to get in over your head with debt and when that is the case, you need the help of a Broward County debt defense lawyer. At Loan Lawyers, our skilled attorneys will defend against these lawsuits to give you the best chance of a positive outcome. Call us today at (954) 523-4357 or contact us online to schedule a free consultation.