This is a guest post from our friends at Credit.com
Oops! It happens to all of us. We make a big mistake with our credit cards. These mistakes are not just embarrassing, they can be costly as well. The costs can come in the form of fees, interest charges and higher loan costs in the future due to a damaged credit history.
Thankfully, your credit card issuer can be forgiving. By taking the right steps in a timely manner, cardholders can fix many of the most common mistakes and even reverse the damage. Here are five common credit card mistakes, and what you can do to make it right when they happen to you.
1. Your Payment Was Late
Eventually, virtually every credit card user will make a payment late. At best, the statement — or the payment — could have been lost in the mail. At worst, the cardholder might just forget. If this happens to you, don’t worry, but take action. Immediately contact your credit card issuer and ask to have any late fees and interest charges refunded. Often, a sympathetic representative will even volunteer a refund without waiting for you to ask. The credit card industry is intensely competitive, and card issuers may not want to risk upsetting a valuable customer over an occasional late fee.
2. You Applied for the Wrong Offer
Because the credit card industry is so competitive, card issuers are constantly tweaking their offers to attract the most customers. At some point, you might apply for a new card only to find out soon afterwards that a better offer for the same card was available all along. The alternate offer might feature a larger sign-up bonus, or more attractive promotional financing terms.
Thankfully, this mistake can also be corrected. Contact your card issuer and ask a representative to apply the other offer to your account. If the other offer is still active, a helpful representative should be able to simply change the “offer code” in your account. If you aren’t initially successful, try using your bank’s secure message center on its website, or simply call back and try again.
3. You Asked for a Lower Credit Limit
Long ago, I held the mistaken belief that reducing my credit limits would raise my credit score. In fact, the opposite is true. Reducing your credit limit will raise your credit utilization ratio, given a fixed amount of debt, and raising that ratio hurts your credit score.
So how can you fix this? It turns out the utilization ratio that affects your credit is calculated using your total amount of debt divided by the total amount of credit you have been extended. Therefore, you can make it up by asking an existing card issuer to raise your credit limit, or simply apply for a new credit card. So long as you refrain from incurring additional debt, you can easily restore or even lower your credit utilization. (If you want to see how your credit utilization compares to the national average, you can use the Credit Report Card, a free tool that shows you two of your credit scores and grades you on the major credit scoring factors.)
4. You Spent Too Much
This might be the biggest mistake people make with their cards, but there are still some solutions. If you purchased any goods you wish you hadn’t, you will want to try to return what you can. In fact, many popular credit cards offer return protection policies that cover you even if the seller denies your return. For example, both American Express and Visa offer return protection on eligible cards (the returns must be made within 90 days, and the refunds are up to $300 and $250, respectively, with a yearly maximum of $1,000).
Once you have exhausted that option, it is time to minimize your interest charges. If you can pay your entire statement balance in full, that is your best choice. Otherwise, it helps to make the largest payment you can as early as possible. Because credit card interest is computed based on your average daily balance, you will save money in interest by paying balances off as soon as you have the money. Further, any payment you make before the statement closes means that the card issuer will report a smaller amount of debt to the credit bureaus. As we have seen, keeping your credit utilization low is one way to improve your credit scores.
5. You Lost Your Card
Credit cards can fall out of your wallet, be left behind at shops and restaurants, or even just be misplaced around the house. Rather than turn your life upside down looking for your card, just make a quick telephone call to the card issuer and asked to have it replaced. In nearly every case, the card issuer will be happy to send you a new one at no charge. At your request, many issuers will even overnight the card to you wherever you are. Why are they willing to incur this expense to cover for your mistakes? Frankly, it is in their interest to make sure you can use your cards.
Jason Steele has worked as a computer systems administrator, a commercial pilot, and a contributor to several of the top personal finance sites as an expert on credit cards and travel. He is a graduate of the University of Delaware with a degree in History. Photo: Michael Coughlan