Where Not to Use A Credit Card
Credit card companies know where you shop, how often, and what you buy. They know the restaurants where you dine, the brand of tires you just put on your car, and whether you and your spouse have been to a marriage counselor. That information could affect your credit limit and your rates unless you know where not to use a credit card.
Every time you use your credit card to buy something, the credit card issuer’s computers store a record of that purchase (you’ll see such information on your bill). This information can be used by issuers and lenders to figure out all sorts of things, such as where you live (so that if you suddenly make a rash of purchases elsewhere, it could be an indication that someone else is using your card, i.e. identity theft
). This practice of drawing conclusions based on what you buy is called “data mining.”
Credit card companies and other lenders act in accordance with those conclusions. Given recent problems with consumers defaulting on credit card debt, credit card companies may be taking pre-emptive action to reduce credit limits of consumers that suddenly exhibit what they consider to be “risky” behavior. For example, if Barbara regularly used her credit card at expensive department stores and now seems to be making a lot of purchases at stores known for their low prices, it could raise some red flags that Barbara might be in financial trouble. Even if all Barbara is doing is trying to save herself some money, it is important to know where not to use a credit card.
Cash is king
To keep your rates from being raised due to what might look like financial difficulties, you might be better off to not use a credit card making purchases like these:
1. Discount & Thrift Stores: If you haven’t been paying with a credit card at stores known for deep discounts or even resale and penny shops, don’t start now. Credit card companies could interpret such a switch to mean you fear you’re going to lose your source of income.
2. Marriage Counseling and/or Therapy: Marriage counseling could be interpreted to mean you’re heading for divorce, which could lower your income and increase your expenses. Personal therapy could be interpreted by some lenders as pointing to psychological problems. By all means, preserve your marriage and your mental health, but pay your copay with cash if you can.
3. Alcohol: Don’t bring your credit card to the bar – charging drinks can look like a way to escape stress and heavy consumption could be seen as another indicator of personal lows. Take cash (a great way to keep from overspending).
4. Retreading Tires: Lenders might see trying to get more wear of your tires as a sign you can’t afford new tires – especially if you purchased new tires on your card in the past.
Now that you know more about data mining and where not to use a credit card,
get your credit report & score.