Sad couple looking hopeless holding a credit card

9 credit card mistakes to avoid

If you’re doing any of the following nine credit card mistakes to avoid, engage in some corrective behaviour that will ensure you’re being a responsible cardholder!

Making minimum payments

Making the easy-looking minimum payment on your credit card debt only keeps you in debt longer. All you're doing is increasing the amount of interest you’re paying on the card, plus the duration of your debt. Lower balance numbers pay less on the interest percentage.

Increasing the amount you’re paying per month – above the minimum payment – will help you pay off your credit card balance quicker and cheaper.

Paying late

Some credit card companies charge a late fee ($25 to $35) if you pay your credit card even a day after its due date. It will also eventually affect your credit score negatively if it becomes a pattern.

Your interest rate may rise as a penalty as well. If your normal interest rate of 19.99% is changed to 29.99%, you’ll be paying way more on interest per month and your outstanding balance will increase in a hurry.

If you pay 30 or more days late on your statement, credit bureaus are usually notified and your deliquency will be stamped onto your credit report for seven years.

Loaning out your credit card

Loaning out your card to someone else is basically like giving them free reign to purchase what they want, while you will be responsible for paying the bill. Never loan it out unless you’re prepared to pay for all the purchases they make.

Waiting to report your card lost or stolen

Waiting to report your credit card lost or stolen is a very bad move. This loss is something that cannot wait, because whoever finds your card now has the ability to make purchases on your behalf, especially if it is a card with the ‘tap’ function.

Maxing out your credit card

Getting close to your credit card limit puts you at risk for incurring ‘over-the-limit’ fees and penalty interest rates.

Keep your balance less than 30% of your overall limit. In practice, this means with a limit is $1,000, your balance should never go over $300 to maintain a healthy balance. If your limit is $8,000 keep your balance lower than $2,400, etc.

Of course, you’ll want to zero your balance out as soon and as often as possible.

Closing your credit card for no reason

Cancelling your credit card without a backup will usually only cost you points on your credit score when your debt-to-credit utilization ration spikes up. See the debt-to-credit utilization section in our article How many credit cards is too many? for more information on that.

If you are closing a card, it should be because you have found another credit card with a comparable credit limit at a better or similar interest rate.

Applying for too many cards at once

Every time you apply for a new credit card, there will be what’s called a ‘hard inquiry’ on your credit report which will negatively affect your score for a short period of time. The more often this happens around the same time, the harder it is for your score to rebound.

Don’t say yes to every card that is offered to you. Think about asking your present credit company to increase your limit first if you’re looking for more credit.

Storing your credit card number, password or pin on a device

This is debateable, but keeping your card credentials stored on a device could make identity theft or fraud easier if someone were to come into possession of your smartphone or laptop. Don’t store photos of the front and back of your card on your phone or computer either.

Treating a credit card like a debit card

Credit cards are not intended for use at an ATM, though many people use their credit cards to withdraw cash. If you look at the terms and conditions of your card, there’s probably a section about withdrawing funds, which they call “cash advances.” These cash advances come with steep fees and additional interest charges. Avoid it!