The Top 10 Credit Card Mistakes People Make

November 7, 2022
ten credit card mistakes

Do you know the most common credit card mistakes that people make? You might even be making them as well!

Almost everyone has a credit card nowadays. In fact, a majority of people have more than one credit card. While it’s convenient to have multiple cards for different purposes, it can also be easy to make mistakes with them if you’re not careful. 

Here are the ten most common mistakes people make with their credit cards. Avoid these missteps and you’ll be on your way to using your cards wisely!

1. Not reading the terms and conditions before signing up for a credit card

It’s easy to gloss over the terms and conditions when signing up for a credit card. After all, who really reads all that fine print? However, failing to do so can cause some serious problems down the road. 

For example, you may be inadvertently responsible for any unauthorized charges made on your card. You might also be subject to higher interest rates or fees than you expected. In addition, the terms and conditions often include important information about your rights and responsibilities as a cardholder. 

credit card terms and conditions

So take a few minutes to read through the fine print before you sign up for a new credit card. It could save you a lot of hassle in the long run.

2. Not paying off their balance in full every month

Many people use credit cards to make purchases, but not everyone pays off their balance in full every month. This can be due to a variety of reasons, such as unexpected expenses or a change in income.

When you carry a balance on your credit card, you will accrue interest charges. The amount of interest you pay will depend on the interest rate on your card and the size of your balance. Over time, these interest charges can add up, making it difficult to pay off your debt. 

high interest rates

Additionally, if you only make minimum payments on your credit card, it will take longer to pay off your debt and you will end up paying more in interest charges. To avoid accruing interest charges, it is best to pay off your credit card balance in full every month.

You can also take advantage of 0% APR offers from some credit card companies. These offers allow you to avoid paying interest on your balance for a promotional period, which can be helpful if you are trying to pay down debt.

3. Applying for too many credit cards at once

As anyone who has applied for a credit card knows, the process can be a bit of a hassle. You have to provide personal information, undergo a credit check, and wait for the issuer to make a decision. If you’re applying for multiple cards at once, the process can become even more time-consuming and frustrating. 

Additionally, each time you apply for a credit card, the issuer will pull your credit report, which can result in a temporary dip in your score. And if you’re rejected for a card, that’ll show up on your report as well. 

So while it might be tempting to apply for multiple cards at once in the hopes of getting approved for at least one, it’s generally not worth the trouble. It’s better to focus on applying for just one or two cards that you’re reasonably sure you’ll be approved for. That way, you won’t end up with too many rejections on your record – and you can start using your new credit card right away.

4. Maxing out their credit limit

Maxing out your credit limit can have a number of negative consequences. 

  • First, it can damage your credit score, making it harder to get approved for new lines of credit. 
  • Second, it can increase your interest payments, since most cards charge higher rates on balances that exceed the credit limit. 
  • Finally, it can put you at risk of overspending, since it’s easy to forget that you’ve reached your limit and continue to make charges. 

If you find yourself close to your credit limit, be sure to take steps to reduce your balance as soon as possible. By doing so, you can avoid costly fees and keep your finances on track.

5. Not using their credit card regularly

Many people don’t realize that if they don’t use their credit cards regularly, they could be harming their credit scores. Credit scores are based on your credit history, which is a record of how often you’ve used your credit card and how well you’ve managed your payments.

If you don’t use your credit card regularly, lenders may see you as a “high-risk” borrower and may be less likely to approve you for a loan or offer you a competitive interest rate. 

Additionally, not using your credit card can also lead to your account being canceled, which would also damage your credit score. Therefore, if you want to keep your credit score healthy, it’s important to use your credit card regularly.

6. Closing their credit card accounts without understanding the consequences

Many people close their credit card accounts without understanding the consequences. If you close your account, the issuer will report the account as “closed by consumer” to the credit bureaus. This can hurt your credit score because it looks like you’re trying to hide something. 

Additionally, closing an account can increase your credit utilization ratio, which is the amount of debt you have compared to your available credit. This can also lower your score. 

And finally, if you have a positive history with the issuer, closing the account will remove that history from your credit report, which could shorten your average account age and reduce your score. So before you close your next credit card account, be sure to understand the potential impact on your credit score.

7. Failing to monitor their credit score and overall financial health

Many people believe that as long as they pay their bills on time, their credit scores will take care of themselves. However, this is not the case. In order to maintain a good credit score, it is important to regularly monitor your credit report for errors and fraud.

Additionally, your credit score can be impacted by factors such as late payments, high balances, and even applying for new credit. As a result, it is important to stay on top of your financial health in order to maintain a good credit score.

There are many resources available to help you track your credit score and credit report. By taking the time to monitor your credit, you can avoid problems down the road.

8. Making late payments or missing payments altogether

Making late payments or missing payments altogether can have a negative impact on your credit score. If you have a history of making late payments, your credit score will reflect that and make it harder for you to get approved for loans or lines of credit in the future. 

Additionally, if you miss a payment entirely, that will also go on your credit report and could lead to a decrease in your credit score. To avoid this, always try to make your payments on time and keep an eye on your due dates so that you don’t miss any payments.

If you are having trouble making ends meet, there are also options available to help you make your payments on time, so be sure to explore all of your options.

9. Not paying attention to your credit utilization ratio

Your credit utilization ratio is one of the key factors that lenders look at when considering your creditworthiness. In a nutshell, it’s the amount of credit you’re using compared to your total credit limit. 

For example, if you have a $5,000 credit limit and you’re using $2,500 of that, your credit utilization ratio would be 50%. Typically, it’s best to keep your credit utilization ratio below 30% to avoid harming your credit score. 

However, even if your ratio is below 30%, you may still want to pay down your balance further to help improve your score. The bottom line is that paying attention to your credit utilization ratio is important if you want to maintain a good credit score.

10. Not using your rewards points

If you’re like most people, you probably have a few reward points sitting around that you’ve never used. And if you’re not using them, you’re essentially leaving money on the table. There are a few reasons why people don’t use their rewards points, but the most common reason is that they simply don’t know how. 

Here are a few tips to help you get the most out of your rewards points:

– Check the expiration date: Most reward points have an expiration date, so be sure to check when yours are set to expire. If they’re close to expiring, try to use them as soon as possible.

– Know the rules: Each rewards program has its own set of rules, so it’s important to familiarize yourself with them before using your points. For example, some programs may require you to redeem your points within a certain time frame or for a minimum purchase amount.

– Use them wisely: When it comes to using your rewards points, it’s important to use them wisely. For example, redeeming them for cash back or gift cards is usually a better option than redeeming them for merchandise. And if you have the opportunity to transfer your points to a travel partner, that’s usually a good idea too since you’ll get more value for your points that way.

By following these tips, you can make sure that you’re getting the most out of your reward points. So don’t let them go to waste – put them to good use!

You Don’t Have To Make These Credit Card Mistakes!

Congratulations on making it through our list of the ten most common mistakes people make with their credit cards! As long as you avoid these missteps, you’ll be using your cards wisely in no time. 

Looking to repair your credit score?? Give us a call at 408.912.2323!