4 Common Credit Card Mistakes

Credit cards come with tons of perks, from reward points and travel amenities to retail discounts. However, it’s all too easy to swipe that piece of plastic over and over again and forget that credit cards carry a lot of financial responsibility. Ignoring those responsibilities could have dire effects on not only your credit score but also your personal life. Here are some top credit card mistakes people make and how to avoid them.

Only Paying the Minimum Payment

Every month, you’ll see a “minimum payment due” on whatever you’ve spent that billing cycle. While the minimum payment might only be $25 or $50, that doesn’t mean you should just pay that. Only paying the bare minimum each month is an easy way to rack up interest fees and possibly lower your credit score. Set aside money in your savings account to make sure you can pay off your credit card bill each month, or at the very least, don’t charge more than you have.

Letting the Balance Carry Over Each Month

Just like only paying the minimum balance is a bad strategy for credit card use, so is paying only part of the balance each month and letting it carry over from bill to bill. Most credit cards have 0% APR to start, but that often goes up after the first year, or when you don’t pay off your balance. Maintaining a balance will trigger interest payments; soon, you may have to pay hundreds of dollars more monthly.

Skipping a Payment

Skipping, missing, or forgetting a payment is a big no-no when having a credit card. Your credit score may plummet between 17 and 83 points if you are a month late on payments and up past 100 points if you’re more than 90 days late. This credit score dip can hurt you when you want to make a big purchase, such as a car or home. Additionally, late payments stay on your record for up to seven years.

Getting Too Many Credit Cards — or Not Having Any

Banks and credit card companies love giving away special promotions and bonuses for signing up, but continuously signing up for new cards can be a trap. You might get pressured into spending more than you have to activate those sign-up bonuses, leaving you with a ton of debt. It can also be a red flag, as taking out a new credit card opens up a line of inquiry on your credit report. 

It might be tempting to have no credit cards to avoid those pitfalls altogether. You will need to build credit throughout your life to make bigger purchases down the road. Experts recommend having less than five credit cards with manageable balances at any given time.

_{Featured Image Credit: Yuliya Padina/ iStock}