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Credit cards can have many practical uses. You might be using credit cards to maximize rewards or simply to have convenient access to borrowed funds. The reasons to have and use a credit card can vary, but everyone should follow some basic rules when it comes to using a credit card efficiently.

If you misuse your credit cards, it could affect your credit score and overall financial health. Let’s take a look at the common mistakes many people make with credit cards so you can avoid making them yourself!

Paying the Minimum Payment

Your goal might simply be to preserve your credit score, so perhaps you just pay the minimum on time and as agreed. Meanwhile, interest racks up and compounds on your balance and you go into debt.

Paying interest on borrowed money can be a necessary evil, but it’s not ideal. Credit card interest is often the highest out there. Aim to pay off your credit card, in full, each month so that you can use your hard-earned money to save, invest or pay down debt.

You should also be aware that having a high balance on your credit card could affect your credit utilization ratio and negatively impact your credit score.

Not Paying Attention to Your Billing Statements

One of the great things about using a credit card is that the monthly statement gives you a way to review your spending each month. Use this to your advantage!

Take the opportunity to review all the charges you made during the month. If something doesn’t look familiar, investigate and dispute unauthorized charges as needed.

You may be paying for errors and getting overcharged in ways you’re not even aware of. Taking a few minutes each month to double check your bill to avoid fraudulent charges, unused subscriptions or overpayments is a good use of time. This will only save you more money in the long run.

Getting Too Close to the Maximum Spending Limit on Your Card

When you spend the maximum or even get close to the limit of your credit card, you’re affecting your credit utilization ratio. It may seem harmless because you don’t actually hit your limit, but your credit score can be adversely affected by a high credit utilization ratio.

There are a couple of ways to avoid this issue. The simplest one is to spend less on your credit card. It may be easier said than done, but hopefully, you have other methods of spending besides your credit cards.

Another way to avoid getting too close to your limit, is by getting approved for a higher limit on your card. The key is to not increase your spending as your credit limit increases.

You can also just leave unused credit cards open in order to keep your total available credit limit higher. Another way to maintain a good credit utilization ratio is to pay your balance off each month (early, if possible). Most credit card issuers submit your balance to credit bureaus once a month. They submit the balance of your account at the time of reporting. If you pay your card balance off earlier, then the credit card issuer will report a lower amount than your actual spending for the month.

Making Late Payments

When you pay any of your bills late, you’re penalized. A late credit card payment is not any different. Not only can you incur late fees by your card issuers, your credit score can be affected.

Even just one or two missed payments can create a ding in your credit report. The blemishes on your record can lead to a decrease in your credit score. The simple solution is to make your payments on time. It may help to put payments on autopay so you can set it and forget it in time each month.

Closing Credit Cards

Many of us have unused credit cards that take up space in our wallets. While it would be convenient to close the accounts and get rid of the cards, it would likely negatively affect your credit score.

The unused cards still have credit limits, even when you’re not actively using them. These unused cards add to your total spending limit, which can lead to a lower utilization ratio. Your credit score is positively impacted by a lower utilization ratio, so it could be worth it to keep these “inactive” cards open.

The only exception is when you’re paying a high annual fee. If you cannot justify the annual fee with great benefits like rewards or perks, it may be best to close the card. Your credit score may dip temporarily, but it should recover as you continue to practice good credit habits over the long term.

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This Post Has 14 Comments

  1. I have a fairly healthy credit score but I was told to not always pay off my credit card to make it even higher. So I did not pay the whole amount for a couple months and then recently noticed my score went down. The notice for the reason is stating that my credit report shows relatively low use of my total available credit limit. Does this mean I don’t use enough of my credit limit? I’m quite confused now with the conflicting information.
    Thanks for your help!

    1. Hi Lora:

      You do want to be using your credit cards on a regular basis. I can also tell you that you can pay off the whole thing every month. Doing so definitely won’t hurt your credit. The only benefit of not paying your full credit card bill is for the credit card company in the form of the extra interest they get from you.

      The other thing to keep in mind is that you may show a slightly lower credit utilization depending on when they pull your credit report through whatever service you use for soft pulls just based on the fact that you recently paid down or paid off your bill and there haven’t been that many new charges. It could just be a matter of the cycle. Hope this helps!

  2. Because I had to pay for an alternative lung cancer treatment(which worked!!!) my Chase card is around $12,000. The interest is making it worse even though I am paying double the amt due @month. Is it advisable to pull money from an already low IRA or go to a zero % interest credit card? I am a sr. and have some equity in my home also. Have always kept credit scores in excellent high range.

    1. Hi Frankie:

      first and foremost, I’m glad to hear you’re healthy! That’s wonderful! I can think of a few options you might have.

      If you’re 62 or older, you could look into a reverse mortgage to utilize the value of your home without having a mortgage payment or having to touch your IRA. Our friends at One Reverse Mortgage could help with that if you would like to look into that option. You can also call them at (888) 980-1543.

      You could also do a cash-out refinance to take advantage of your equity. The interest on a mortgage is much lower than a credit card. If you want to look in your options to do that, you can apply online with Rocket Mortgage or give us a call at (888) 980-6716.

      Another alternative would be a personal loan. Consolidating the debt could help you pay it off at a lower interest rate. You can check out Rocket Loans. Your good credit history could help you get a better rate with any of these options.

  3. You may consider checking with the credit card companies regularly as to increasing your credit limits and finding out the closing date used for your account. This will allow a longer term “interest free loan” if the balance is paid monthly.

  4. I’d like to mention discussing lower percentage rates with credit card CSR’s as well as taking advantage of 0% balance transfer offers in order to lower your monthly bill and pay down high balances. It’s just as important to know when the 0% offers end to avoid being stuck with a huge bill after it ends and reverts to the standard purchase percentage.

    1. Thanks for sharing your tip about discussions with customer service reps and taking full advantage of 0% balance transfer offers. Have a good one, Dan!

  5. As I was discussing with one of your representatives yesterday 10/10/2018, concerning my mortgage payments in the coming months, he mentioned that I very well may be eligible for the ‘Reverse Mortgage’ program. He connected me to their line and I left a message but have heard back at this time. Can you please send me their #? Or can yo possibly confirm whether or not I’m eligible for th program? Its very important. So please contact me asap!
    Thank you,
    Calvin R White

    1. Hi Calvin:

      I’m going to make sure we get this over to our client relations team to make sure we get you connected with someone. Thanks!

    1. Our expertise is in helping people prepare their financials for a mortgage. If you had to get a bankruptcy, you would want to talk to a bankruptcy attorney and/or financial advisor who can take a look at your holistic financial situation and go over what puts you on the best path to a better financial future. However, we do have a couple of articles that might be helpful as far as whether to affirm or not affirm your mortgage and getting a mortgage after bankruptcy. We also have this article on steps to take after bankruptcy. I hope these are somewhat helpful and wish you luck!

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