10 Worst Credit Card Mistakes to Avoid
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Whether you’ve had credit for years or you’re just starting out, avoiding common credit card mistakes is the best way to maintain a good relationship with credit.
Despite credit cards being a tool for building a credit history, consumers don’t always agree on their usefulness. Some people live by them and use them for just about every purchase. Others, though, prefer cash or debit, and only pull out a credit card on rare occasions.
Ultimately, you have to decide whether it makes sense to use cash or credit.
If you prefer credit over cash, it’s important that you know how to manage your accounts responsibly–so that you don’t commit some of the worst credit card sins.
In no particular order, here’s a look at 10 of the worst credit card mistakes to avoid.
1. Paying your credit card bill late
Paying your credit card bill late (or not at all) is one of the worst mistakes you can make, whether you’re managing credit cards or other expenses.
Getting a credit card can help establish or build a stronger credit history. For this to happen, though, you have to pay your bills on time every month. In fact, payment history makes up the largest chunk of your FICO score—about 35%, according to MyFico.com.
2. Too much credit card debt
A love-hate relationship with credit cards is often due to a bad personal experience. Some people accumulate high debt or max out their cards, and then spend years trying to chip away at the balance. This ends up costing them hundreds in interest.
One of the best ways to avoid a negative experience with a credit card is to use it responsibly. This includes only charging what you can afford and paying off your balance in full every month.
3. Only paying the minimum
Yes, making your minimum payment keeps your credit card account in good standing. But this approach doesn’t quickly pay down a high balance.
If you’re already in debt and can’t afford to pay off your balance in full, at least pay double, triple or quadruple your minimum payment—so you can make headway.
4. Applying for too much credit
Applying for new credit card accounts, especially in a short span of time, can be disastrous to your credit score.
It’s estimated that every credit application can reduce scores by 2 to 5 points. So if you frequently apply for in-store credit to save 25% off your purchase, you could hurt your credit score in the long run.
As a general rule of thumb, space out your credit applications and only apply for credit when absolutely necessary.
5. Not reading the fine print
Make sure you read the fine print before applying for a credit card. Credit cards are known for fees. If you don’t know what you’re paying in interest, or how much the card charges for balance transfers or foreign transactions, you could pay hundreds unnecessarily.
6. Choosing the wrong type of card
Credit cards are not created equally. For a positive experience, choose a card that’s right for your spending and credit habits.
If you use credit regularly and pay your balance in full every month, you might benefit from a rewards program where you earn cash back or points toward future purchases.
On the other hand, if you’re establishing credit for the first time, your chances of an approval increase with a secured credit card.
7. Ignoring your monthly statement
Never assume that your credit card statements are always accurate. Identity theft is a real problem, and thieves are clever. They know how to get their hands on your personal information. So check your credit card statements thoroughly.
If you come across an unfamiliar charge—regardless of how small—contact your credit card company immediately to dispute the charge.
8. Allowing others to use your credit card
Giving another person possession of your credit card is another huge mistake. If the person goes on a shopping spree and rings up a huge balance, you’re responsible for these charges because you gave them authorization to use the card.
9. Never asking for a lower rate
If you’ve had a credit card for a while and you’ve always paid on time, call your credit card company and negotiate a lower interest rate. Many companies will give an on-the-spot rate reduction to loyal, responsible customers.
10. Closing an old credit card account
If you haven’t used a credit card in some time, you might contemplate closing the account. Keep in mind, though, that your average account age makes up 15% of your credit score. So the longer you have an account, the better.
The problem with closing accounts is that you could unintentionally shorten the average length of your credit history, more so if you close your oldest account. Even if you don’t use a particular credit card anymore, it’s sometimes better to keep the account open and use it once or twice a year (for a small purchase). This keeps the account active.
Knowledge is power, and so is sharing…so what’s the worst credit card mistake that you’ve made?