Seven Credit Card Mistakes to Avoid
Avoid these common mistakes to help keep your credit score in good shape and your debt burden manageable.
Having credit cards can be convenient, but they also come with responsibility, and making too many mistakes can put your entire financial health in jeopardy for years to come. Following are some common mistakes you should avoid to help keep your credit score in good shape and your debt burden manageable.
1. Not paying your bills on time
One of the most obvious mistakes to avoid, yet one of the most commonly made, is not paying your credit card bills on time. Late fees can add up fast, and that means your balance will increase. If you're not careful, this can spiral out of control, sending you to, or past, your limit before you realize it.
2. Making only the minimum payment
As you get caught up in the day-to-day payment of bills - credit cards and otherwise - it can be tempting to just pay the minimum amount due. This way you have more money to spend in the near-term. This isn't the wise approach, however. Ultimately, you'll be paying more in the long run as you pay back not only the money you've spent with the card, but also any applicable interest and late fees you've accrued.
3. Running up too much credit card debt
Paying only the minimum monthly payment is also a good way to help your debt mount up. If you spend too much, but pay too little back, you're likely to be sitting on a mountain of debt soon. The mountain will be even bigger if you do the same with multiple cards and/or have other loans to pay, such as a mortgage, car loan, and student loan.
4. Having too many credit cards
Having too many cards is another common mistake that can cause problems. Receiving several different credit card statements each month may make it more likely that you’ll forget a payment or make one late. It’s also easier to fool yourself about the extent of your debt is it’s spread out among several small balances. Sometimes having multiple cards is necessary, but the more you have, the more crucial it is to be diligent about keeping their balances down.
5. Choosing the wrong credit card
When you're looking for a credit card, be choosy about which one you apply for. Shop around to find one that has benefits you can use and the best interest rate you can get. Pay close attention to the terms in the fine print. If there’s an attractive introductory rate, when does it expire? And here may be hidden fees or limitations that aren't immediately clear.
As CreditCards.com points out, "The fine print in today's credit card offers include two-tier balance transfer fees, which can make balance transfers unexpectedly expensive, and -- surprise! -- security interest clauses that allow card issuers to repossess property bought with credit cards if you fall behind on payments."1
6. Exceeding the card limit
Exceeding the limit of your card is a major mistake that should be avoided at all costs. If it gets to that point, it's likely because the cash to keep your balance down isn't readily available. In other words, money going out was consistently exceeding money coming in. As you approach your card’s limit, it’s time to take a hard look at the spending habits that got you into that situation.
7. Having a credit card charge-off
A charge-off is what happens when you fail to make payments on your credit card for too long, and the bank determines that it will be unable to collect the money.
"A charge-off is one of the worst things to happen to your credit report and your credit score," says Latoya Irby at consumer finance site The Balance. "The charge-off listing will remain on your credit report for seven years and could affect your ability to get credit cards and loans in the future. It takes six months of missed payments to get to charge-off status. Bring delinquent accounts current before it gets to that point."2
While there are plenty of mistakes that can be made, credit cards bring consumers a great deal of convenience and financial flexibility. It's always helpful to know that you have credit that can be used when you need it. Check out these credit card options from Nevada State Bank.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC