Have You Been Making a Big Credit Card Mistake?


credit card mistakeIt is relatively simple to use a credit card sensibly and responsibly, without ending up in debt. However, you do need to know a bit about how credit cards work as well as the terms and conditions of your particular card. Despite using credit cards for years, however, some people still continue to make pretty big credit card mistakes, some without even realizing it!

Take a look at these credit card mistakes, just to check you’re not making any of them:

Mistake #1 – Only paying the minimum monthly requirement

Some people think that paying the minimum amount required every month is a way to save themselves some money and make owning a credit card cheaper. However, these people are obviously not looking at their credit card statements too closely, as when you don’t pay your balance in full each month, it carries over to the next month and interest is added. This interest can start to mount very quickly, making it near impossible after a while to fully clear your balance. If you pay in full and on time every month, you need never worry about interest rates.

Mistake #2 – Applying for a lot of credit cards at once

If you send out a wave of credit card applications at once, hoping to increase your chances of being approved, you might think that the worst that can happen is that you get a pile of rejection letters in the mail. What can actually happen is that each application and rejection is marked down on your credit file, making your chances of being approved smaller and smaller the more applications you make.

Mistake #3 – Never using your credit card

This one might not sound like a mistake at all, and some people think it’s a good way to avoid the temptation to overspend and end up in debt. What it actually does is damage your credit score, as not using your credit card at all means there is no activity on your credit file. Lenders like to see activity, where you use your credit card and pay back what you owe, so you need to establish a credit history. If you don’t want to use your credit card, you might want to close your account. Before you do so, consider making a purchase and then clearing your balance, just so you have something to show for the card on your credit file.

By avoiding these credit card mistakes you can avoid falling into the credit card debt trap and improve your credit rating.

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23 Responses to Have You Been Making a Big Credit Card Mistake?

  1. Little House 07/19/2013 at 6:59 am #

    Paying the minimum only is a debt sentence! Even if you can’t pay the card off in full (which you should do), make a substantial payment OVER the minimum!

  2. Midlife Finance 07/19/2013 at 9:12 am #

    We always pay off the cards every month. That’s the only way to live.

  3. zimmy@moneyandpotatoes.com 07/20/2013 at 3:30 am #

    I definitely have been guilty of only paying the minimum balance on my credit cards in the past. There is no easier way to stay in debt for life than just paying what the credit card companies say you should pay. If you have the ability to pay the entire balance off each month. It would really behoove you to do so.

    • Marissa @ FinanceTriggers 07/21/2013 at 9:27 am #

      Mistake #2 will only allow you to shop even more so that’s a big no no, unless you have a job that enables you to pay off the entire balance for each of your cards a month.

  4. Greg @ Thriftgenuity.com 07/21/2013 at 4:14 pm #

    I can’t imagine only paying the minimum on a card. I just am not wired that way. It is a sure fire way to seriously derail your finances.

  5. David S. @PBC 07/21/2013 at 6:45 pm #

    HI Paul,

    These are excellent tips on how to use credit cards properly. Credit cards are big risks. The truth is many people have been buried deep in debt due to unwise use of these plastic cards. It is time to be a smart consumer and get away from the debt hazard.

    • Paul 07/21/2013 at 7:57 pm #

      Credit cards are an important financial tool that can not only build a credit history, they can also tell your employer if you have the maturity to handle them!

  6. SB @ One Cent at a Time 07/21/2013 at 8:21 pm #

    I dont think never using a credit card, out of few more, is a bad thing. Out of my 4 cards one usually is in dormant state, and my score has not been affected so far.

  7. Eric J. Nisall 07/22/2013 at 11:01 am #

    I would say that closing a credit account can have more of a negative impact than not using a card. While the lenders may not see activity, by closing the account, The individual is reducing their available credit, as well as reducing the average length of their credit history, which weigh more heavily on the calculation of the credit score than the inactive yet open line of credit.

    • Paul 07/23/2013 at 1:37 pm #

      Good point Eric. It is also important to keep an active credit history by making a purchase every so often and pay that balance off each month.

  8. Dividend investing Martin 07/22/2013 at 10:08 pm #

    This is insane. Not using a CC is bad thing, using it is bad thing, what the heck?

    I have a couple of them, some with zero balance and use them for a small payment time to time and pay it of as soon as the statement arrives so I do have the accounts closed for dormancy.

    On the other hand I also have cards on which I have a large debt as well and I want to get rid of the debt, so I try to reduce using of other cards as much as possible.

    • Paul 07/23/2013 at 1:33 pm #

      Insane? Not really. Not using your credit can harm your credit score while having a high debt to income ratio is never a good thing. Having a track record of responsible credit card use is important!

  9. Felix Lee 07/27/2013 at 11:37 pm #

    I used to pay the minimum only before. That was a mistake I never make again.

  10. Bryce 07/28/2013 at 5:20 pm #

    Yup, I got stung by #3. I had a couple credit cards that I no longer used because I had received cards with better cashback rewards, so I let the old cards die off. I even got a couple of warnings from the credit card carriers that they were going to cancel my accounts if I did not use them, and of course, they did. I didn’t think much of it until I looked at my annual credit report. Ouch. Oh well, lesson learned. I only have two cards now, and they both get used each month. I pay them off in full each month.

  11. turn one pound into one million 08/04/2013 at 6:56 am #

    I fully take advantage of credit cards. I use a cash back one with no annual fee and pay it back in full each month. Unless you can do this then you should not bother with them.

    • Paul 08/04/2013 at 7:30 am #

      Good for you! Paying the balance off each month is the most important thing you can do to stay out of debt!

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