Whether you’re a first-time credit card owner or you’ve got a credit score in the 800s, odds are you’ve made a mistake at one point or another when it comes to using your credit card. The mistakes we’re about to outline are all too common, yet they can really wreak havoc on your credit rating, and can lead to additional fees and higher interest rates.
These are a few of the biggest mistakes consumers make when it comes to your credit cards, and here are our suggestions on how to avoid them.
- Making late payments. Paying your monthly bill late is one of the most common mistakes you can make with your credit card, and also one of biggest mistakes. Paying every month keeps your account healthy and helps you avoid a myriad of fees. Your payment history accounts for about 35 percent of your FICO score, so any payments that are more than 30 days late can seriously impact it. One big way to avoid making this mistake is to schedule automatic payments so you can keep on track.
- Paying only the minimum amount every month. While you may see that you only owe a certain amount every month, that doesn’t mean you should only pay that amount. In a sense, paying the minimum every month is like kicking the can down the road – you’re avoiding paying interest, but you’re not really getting anywhere when it comes to paying down your balance.
- Maxing out your cards. You may not realize it, but using more than 30 percent of your available credit can be harmful to your credit score. Maxing out a credit card can lead to increased fees and a possible penalty interest. Use your credit card for purchases that you know you’ll be able to pay off immediately so you can maintain a low balance.
- Applying for many cards at one time. Another thing you may not know is that your credit score is affected by the number of credit cards you apply for, as it raises a red flag to lenders. Instead, only apply for new cards on an as-needed basis, and avoid applying for a new credit card if you’ve recently taken out loans.
- Withdrawing cash or getting a cash advance. It’s very important to avoid getting a cash advance on your credit card unless it’s an emergency. Cash advances are different from credit cards in that they accrue interest immediately, and generally at a higher rate. If you should need a cash advance, just remember to carefully read the fine print and pay it back as soon as possible.