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woman paying with a credit card

It’s easy to make impulse purchases when you have that shiny piece of plastic in your pocket.

Yep, we’re talking about credit cards, the avenue to reckless spending, high-interest charges and ruined credit.

However, as long as you’re responsible, credit cards can be a huge help for building credit to rent an apartment, get insurance or obtain a home loan or auto loan. Credit cards are also more secure than debit cards and come in handy when you’re shopping online.

Before you stick your credit card in the freezer, here are nine common credit card mistakes and how you can avoid them.

Paying Bills Late

Even one late payment can result in a hefty late fee, additional interest charges and a ding on your credit report. In fact, paying your bill late is one of the easiest ways to kill your credit.

A common misconception is paying your bill right smack dab on the due date and thinking you’re on time. Pay attention to the payment posting date: often, the payment doesn’t get posted right away and could result in a late fee and interest charges on the unpaid balance.

The best way to avoid this scenario is paying your bill a littler earlier than the due date. Make a note in your calendar to remind yourself to pay your bill and never miss a payment again!

Racking Up a Bill You Can’t Afford

Even more damaging than a late payment is credit charge-offs, a debt that a creditor believes cannot be collected.

Credit charge-offs result from a lack of payment on a debt and will be sent to a collection agency where they will attempt to collect the balance. This will hurt your credit score and will stay on your report for seven years. Bad credit means higher interest rates later on down the road.

Long story short, make sure you’re not spending more than you can pay. Racking up a high bill can be difficult to pay off in the end. Create a budget to decide what you can spend, and make sure you’re making your monthly payments.

Closing Credit Cards

You’ve had it with the pressure of that piece of plastic and are now sitting in your kitchen and ceremoniously cancelling and cutting all of your credit cards.

This may seem like a positive purge in your life; however, a common mistake is closing a credit card with a high credit limit. This will shorten the length of your credit history and most likely decrease your credit utilization ratio, which are factors that influence your credit score.

Keep the card open: It’s worth saving and only using every once in a while for small purchases. However, if you still choose to close your older credit cards, make sure the balance is paid off in full first.

Making Only Minimum Payments

Paying only the minimum due is like getting caught on a hamster wheel. You’ll eventually pay off that bill (as long as you’re no longer using the card to make purchases), but you’ll be paying interest charges over and over in the meantime.

It’s tempting to get your credit card statement and just pay the minimum; however, make an effort to pay more than your monthly minimum due – even better if you pay off the whole balance each month.

If you can increase your monthly payment by even 10% or 20%, you’ll make a big difference in the overall amount you’ll owe.

Using Up All Available Credit

You have a certain limit. Why not use it, right? Wrong.

Well, the more available credit you use, the worse it is for your credit score. Avoid using more than 30% of your credit cards’ limits. Lenders don’t want to see that you’re constantly pushing toward the max on your cards.

If you have a need for more credit, try to get your limit raised instead of maxing out your current limit.

Applying for Multiple Credit Cards at Once

Much like using up all available credit, applying for too many credit cards at once can be damaging to your credit.

Think of applying for a credit card like applying for any type of loan: The lender will pull your credit, which could lower your credit score by a few points.

In turn, the lender may think you are a riskier borrower, so avoid asking for a lot of credit cards at one time.

Not Reading Your Statement

It’s not the most exciting thing you’ll ever read, but taking a close look at your monthly statement can avoid oversights and unnecessary spending.

For example, take a free trial offer on a website. Often times, free trials will convert into a paying membership when the trial ends. (Be sure to read the fine print in this case!) Although you may not be using the service, you could get charged fees until you cancel the service.

Additionally, reading your statement is an easy way to spot identity theft. If some unfamiliar charges pop up, you’ll know that you’ve got a problem and will be able to contact your card’s fraud department.

The bottom line here is that checking your statement can prevent a lot of issues, so make sure you check it periodically and read it carefully.

Not Knowing Terms and Fees

It might be hard to read your statement if you don’t understand the language of terms and fees. For example, introductory annual percentage rates, or APRs, are low initial rates that are offered to lure you into opening a credit card. After the introductory period, the APR will rise substantially, so be on the look out for this common oversight.

If you transfer balances, find out if there’s a fee to do so. A balance transfer occurs when you pay off the balances on existing cards or loans by transferring them to another credit card account. Most of the time, you’re charged a fee, typically a percentage of the balance, to complete each transfer.

Be sure to read the fine print in your statement to know about possible fees.

Taking Cash Advances

Sometimes when you open a credit card, the company will send you a handy-dandy little checkbook for cash advances on your line of credit.

Unfortunately, this can be a great way to rack up ridiculous amounts of interest charges and fees. Many lenders charge an up-front fee to use a cash advance. On top of that, the interest rate will likely be much higher than on a regular charge.

Unless you have an emergency and have absolutely no other option, just don’t do it.

Credit cards can be a great thing, if used responsibly. Pay attention and be diligent about your payments, and you’ll be on the track to building really good credit.

If you’re currently battling with credit card debt, check out our tips to get your debt under control.


This Post Has 8 Comments

  1. My credit score is about 540

    I have $16,000 credit debt

    Line of credit $9600

    I f pay off all my debt will my FICO score rise ?
    How long will it take to rise?

    1. Hi Thynn:

      If you were to pay off all of your credit card debt, your credit score should go up. The credit bureaus check your score at different times within a 30 day period, so your credit score would be up and about a month or so. Hope this helps!

  2. Hi Randy,

    When is a good time to make payments besides on the date the company gives you. I’m working on my credit and I’ve heard that there are times you should make your payments. I though it was to spend no more that half your limit.

    Thank you

    1. Hi Shelby:

      Actually, it’s best to use no more than 30% of your credit limit, but you do you want to consistently use the cards when building credit. Additionally, I would ask your credit card company if they can tell you about when they report your credit utilization to the credit bureaus every month. That way, you can make your payment around that time and have you utilization be low. I hope this helps!

      Kevin Graham

  3. The biggest problem that I have with the whole credit deal is Equifax. Their one goal in their existence seems to be to keep everyone’s score as low as they can. I recently was informed by this intrusive organization that my information had probably been compromised in a data breach. WHY are they not held accountable???? I did not tell them to collect all my information and then let some one else illegally steal it. They all should have some form of communication that does not involve jumping through hoops when trying to correct THEIR MISTAKES on my credit report. It seems like a never ending vicious attack of walking a tight wire with these entities. If there was a dollar involved for the politicians this messed up way of messing with people’s livelihood would have already been FIXED!

    1. Hi Randy:

      The Equifax breach was certainly bad. I would also submit to you that enough people were affected by it that there were certainly a lot of politicians whose data was affected by the breach, so it’s affected people from all professions and all walks of life. They absolutely should have done a better job of safeguarding the vast amount of sensitive data they have access to.

      I disagree with you that their goal is to keep your score as low as possible. There are plenty of people who have high scores no matter what credit bureau you happen to be looking at. While FICO doesn’t make its complete formula public, they are extremely public about the things that affect your score. There are some basic things you can do in order to maintain good credit and rebuild it if it has some blemishes. In terms of correcting errors, you do have to jump through some hoops. That I won’t deny. However, those hoops help make sure the data is accurate for the future.

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