The NY Times recently featured an article that talked about Americans who are trying to make a conscious effort to use cash instead of plastic. The catalyst for this paradigm shift isn’t driven by a need to conserve funds or to avoid finance charges as you might immediately suspect. Some consumers are choosing cash over credit to insulate themselves from the risk of being a cyber-crook’s next victim. It seems like a sensible solution on paper until you realize that misguided precautions along these lines are eventually going to hurt your credit score if you are too stringent in your new “cash only “payment habits.
- Credit scoring is really a “use it or lose it” situation. It’s important to remember to use your credit frequently even if you fully intend to pay off the balance each month. Many consumers think that a decent credit score is maintained simply by having available credit and they forget about the importance of actually using the accounts with regularity and responsibility to establish an adequate credit history.
- Before you take drastic steps to change your behavior make some standard inquiries with your card issuer to see what risk, if any, is actually placed upon you when fraudulent activity is detected on your account. You may discover that all of your business partners observe a “zero liability” policy that protects you from loss in the event an unknown party gains access to your payment card information.
- “What happens if I notice some suspicious activity on my credit card account”? This is a great question to ask your card issuer. Allow them to walk you through the basics of how to report a potentially fraudulent transaction on your account so that you will be prepared for the worst case scenario.
- Ask your card issuer if they offer special incentives to cardholders who use their payment cards more frequently. Why not regain your confidence in using your credit cards by also benefiting from programs that you may not have known even existed.
Instead of taking dramatic steps to alter your behavior to opt for cash over credit it might be helpful to just keep an eye on your account activity.
Have you taken any steps to protect your credit cards from data breaches and theft?
John Buzzard is a product manager for FICO® Card Alert Service, and a consumer fraud expert