5 risks you shouldn't take with your credit cards © Corbis

The Basics

5 risks we take with credit cards

Continued from page 1

4. Spend all the way up to your limit

There are a couple of issues here, with piling up debt being the obvious problem. But maxing out your cards also has the potential to damage your credit scores. Scores are partly tied to credit-utilization ratios -- card balances compared with available credit. Max out your cards, and your utilization ratio goes up. This scenario usually results in credit scores going down.

There are also "intangibles" to think about. If you suddenly use up your credit limit, your card issuer could take this as a signal that you're in dire straits. An alarmed issuer might raise your interest rate. (Note that issuers can still raise your interest rate after the first year if they give you 45 days' notice.) And what if you suddenly need a new dishwasher? You should, of course, have an emergency fund for such unexpected expenses. But in these uncertain economic times, that's not always possible.

5. Dispose of it improperly

If you decide you no longer want to keep a particular card, you need to do three things:

  • First, make sure the balance is paid off before you close the account.

  • Second, call customer service and confirm that your balance is zero. If it's zero, go ahead and inform the service rep that you're closing the account. The amount of hoop jumping at this point depends on the card issuer. But stick with it until you're sure you've closed the account. It's also a good idea to send a letter to the issuer stating that you've closed the account and to include details from the call.
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  • Third, cut up your card. There's actually a correct way to do this. You need to disable the magnetic strip with a strong magnet or by scoring the strip with scissors. Then shred the card or cut it into pieces. If this is a bad "breakup" with your issuer, you might even find the process a little cathartic.

This article was reported by Beverly Blair Harzog for CardRatings.com.

Published Oct. 26, 2010

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30Comments
10/27/2010 7:21 PM
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Hey creditfail. I am a car dealer finance manager. Anyone with a 740 score does not have to use that dealer's financing. that person could easily get their own financing elsewhere. If perchance they did sign up at that ridiculous rate they could also re-finance the next day. In fact, in most cases I can get that person a better rate than they can get on their own. I do this every day. If you think you were burned by some car dealer (which I doubt) you paid a high rate because you deserved it. 
10/27/2010 11:32 PM
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@thecar-man & anyone else who is interested,

Well, MSN doesn't like me "spamming". Anyways, there is a phone number and a website that I wanted to give you. You can "opt-out" of those pre-approved credit card offers in the mail =) It's good for up to 5 years. There is also an option to write the major credit bureaus a letter to opt-out: Experian, TransUnion, and Equifax, Inc. Hopefully, it'll accept the link this time =P  http://www.ftc.gov/bcp/edu/pubs/consumer​/alerts/alt063.****m    LOL okay, that starred out part is: "s", "h", and "t" no, I wasn't trying to curse! =(
10/27/2010 9:43 PM
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After attempting for 12 tries to assign a user name that may be appropriate to catch a viewers attention to underscore msn's lack of attention and after being being rejected 12 times I would ask thise who feel disenchanted with msn to read on... Kudos to those individuals /comments who "get it' and suggest that msn doesn't and not only wastes white space but moreover is asleep when entities such as "dazzle smile" - (ring a bell to those that have been exploited by msn and that entity for  about a year and a half )have been mugging those on this website
10/27/2010 6:27 PM
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 Well we know big a$$ Kim Kardashian doesnt know to handle money or cards so whats new?
10/27/2010 9:40 PM
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Is it a need, or want?
10/27/2010 11:08 PM
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I have a tip that may be helpful to someone out there =) Always write your bill out for over the minimum amount. If you pay the minimum only, the majority, if not all, will go straight to the interest. Little to none will actually go to the principal (the debt). Therefore, you may never pay it off! It doesn't have to be a drastic amount. I pay anywhere from $5 - $30 over the minimum a month. It depends on what extra I can afford to put towards it. Hope this helped =)
10/27/2010 10:49 PM
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Hmm...maybe there aren't any "real tips" because credit cards aren't that confusing.  What's the point of bashing an article that contains all the info is should about the subject matter?  I mean, really, what more should it say? 

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MSN seems to be marching toward a new low with the constant dumbing down of their home page and included articles.  When I am enticed to open up an article, I often click out early when I see that there's no real news in it.
10/27/2010 9:30 PM
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At first reading I thought, great advice, MSN Sarcastic. But then I began to think, these practices are more common than we would like to think. Perhaps redundant for most, but you would be amazed at how many find it enlightening. Sad, but true.
12/29/2010 7:44 AM
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What's new about this article that I do not already know? Any person with a good brain knows not to spend up to the limit, give the card to someone who will spend like crazy, etc. I have never been in debt or have any problem with my credit cards since I got my first one roughly 18 years ago.
11/26/2010 10:11 PM
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"What if you suddenly need a new dishwasher...?" You're kidding, right?
11/26/2010 3:53 PM
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This article was as useful to people in REALITY as their prior slogan with filler article that the recession was over in 2009. Yah, sure. Zippity do dah, MSN, that's some in-depth, accurate reporting--NOT. Sick 
11/26/2010 11:34 AM
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I have cards that I don't use regularly. I may have a balance on it that I am paying down, but I don't want to charge more on it so I shred it.
11/26/2010 9:28 AM
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And I really like the way msn changes the heading on a story to make you think it's a new one, When in truth its the same one that was there yesterday or a few days ago. AOL is now my home page and Firefox is my browser, I only come to msn to check my old hotmail account  and when I have extra time to look around at other sites killing time.

11/26/2010 8:58 AM
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The one thing you have to do when cancelling a card is request a letter that reads at your request we closed your account.
11/06/2010 11:05 PM
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First of all, a credit card is NOT extra money; it is a "convenience".  I only use cards that give me something in return, and I never have an outstanding balance... I pay them NOTHING except for the merchandise I purchased, and I reap the rewards.  Lets just say, use "common cents"...Smile
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I just got a pre-declined cred card offer in the mail. (just kidding, but I am sick of bi-weekly offers) If I'm pre-aproved why do they still need my personal bio???
10/27/2010 11:07 PM
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Cancelling/closing your cards actually hurt your credit score, because that can mess with you debt ratio more. Example, you have 25k in credit card debt with a credit limit of 50K - 50%. If you close out an card with a 10K limit now you are looking at 62.5%. Think before you cancel.
10/27/2010 4:50 PM
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Here's one they forgot...the most important one! DON"T USE ANY CREDIT CARDS AT ALL!!! Pay CASH!
I recently got a "Discovered Bondage" card in the mail...I did not even apply for it..so I cut it up..printed a copy of a Vaseline ad and wrote a little note as to what they could do with their card and mailed it back to Discover lol. Credit is for fools...CASH Rules!
Thank You Dave Ramsey!


10/27/2010 4:40 PM
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they are great if you pay them off every month, that eliminates a lot of the small print
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