The good, the bad, and the ugly

Credit cards can be wonderful tools to allow you to do, have, or enjoy things you want or need. They can also give you the opportunity to generate financial trouble for yourself. If not managed properly, credit card accounts can become ugly as they can hurt your credit report, sometimes even preventing you from getting the best deals on more important loans for cars and/or real estate.

Important components of good credit management include some things you should NOT do with your cards. Please read these and make a note to yourself to remember them.

• Don't exceed your card credit limit.
• Don't miss a payment.
• Don't pay a large annual fee.
• Don't apply for several credit cards simultaneously.
• Don't use credit cards to get cash advances (except in emergencies).

Why all these emphatic "don'ts?" See below.

Exceeding credit card limits

When you apply for a credit card, look beyond the stated annual percentage rate (APR). Many cards have a provision that, should you exceed your credit card limit, your APR immediately increases to a much higher level. Exceeding your credit limit is never a good idea, as doing so can bring many neagtive side effects.

Missing a scheduled minimum payment

Depending on your terms, many credit cards have a serious penalty for missing even one payment date. Sometimes in the form of a large fee ($20 to $45, in some cases) or a huge increase in APR (often 10% or more) for the month you were late. Some terms even allow your card company to keep this high APR for the rest of the time your account is open.

Annual fees

Annual fees are a "polite" way of increasing the revenue for some credit card companies. There are many credit cards available with little or no annual fee. Why increase your cost when it may be unnecessary?

Multiple, simultaneous credit card applications

This might seem like a harmless – possibly, even a smart – activity. Wrong. When you apply for credit cards simultaneously, all will check your credit report. These are called "inquiries" and they alone can create two situations not in your favor:

• Your credit score can decrease.
• After the first couple of inquiries show up on your file, other card companies may think you're getting other credit in addition to your request from them.

It is possible that you could actually receive a decline or a higher interest rate simply because of these multiple credit card inquiries.

Cash advances

Once again, getting a cash advance instead of making a purchase seems like the same thing. It isn't. Every bank or credit union carries no more cash than they need, because it can't be used to lend out or invest while it is in a teller drawer, ATM, or vault.

Most credit cards charge a higher interest rate for cash advances than for purchases. Unless you face a cash emergency, do not make cash advances, as they are expensive in the long run.

Follow these basic "don'ts" and your credit cards will be more friend than foe – and less expensive, too.