Top 5 Credit Card Mistakes And How To Avoid Them

Here are the top credit card mistakes to stop making. These can hurt your finances, cause you to be in more debt, and more. Even though I love credit cards because of their many benefits, I understand that they aren’t for everyone. A family member of mine once struggled with credit cards, and they found…

Michelle Schroeder-Gardner

Last Updated: May 26, 2023

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credit card mistakes

Here are the top credit card mistakes to stop making. These can hurt your finances, cause you to be in more debt, and more.

Even though I love credit cards because of their many benefits, I understand that they aren’t for everyone.

A family member of mine once struggled with credit cards, and they found that using a cash only budget was the best way to stay out of credit card debt. Fortunately for them, they were able to recognize their credit card mistakes and found a way to make sure they weren’t adding any debt. Part of that was being proactive and noticing they had an issue with them early on.

However, others are not as lucky.

Some people rack up large amounts of credit card debt, and they do so because they aren’t aware of the credit card mistakes they might being making. According to a study done by NerdWallet, the average household in the United States (who has debt) has an average credit card debt of $15,482.

When you add that all up, it equals $927 billion worth of credit card debt for American consumers. They break this down further and show that the average U.S. household pays around $900 in annual interest. Also, 41% of consumers say they go into credit card debt because they are spending more than they can afford, and 33% say they are adding to their debt because they can’t cover their monthly expenses.

To add to those statistics, the National Foundation for Credit Counseling released their 2018 Financial Literacy Survey and found that one in four Americans don’t pay their debts on time, one in 10 have debts in collections, and 38% of Americans carry debt from month to month.

I find these statistics incredibly saddening, especially when some of this debt is completely avoidable.

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What I find so upsetting about these statistics is that credit card debt is what leads many to living in a debt cycle, which leads to stress, depression, frustration, and more. No one should live like that if they can avoid making many of the credit card mistakes I’ll cover today. Also, credit card debt will keep people from getting out of a paycheck-to-paycheck lifestyle, saving for emergencies, retiring early, and more.

While there are some instances when using credit cards may be a necessity, it sounds like many could avoid much of this credit card debt in the first place. Also, know that there are always ways to make extra income so you can pay off your debts and avoid adding debt all together.

Even if you are one of the many people making some of these common credit card mistakes, it’s never too late to make a change for the better. And, if you’re one of the many people deep in credit card debt, there are always options. While you may feel depressed or frustrated with your debt, there is always a way out.

Here are the top five credit card mistakes that lead to debt. Read below so that you can learn about the possible mistakes you may be making.

5 credit card mistakes.

 

1. Ignoring the terms.

Before you sign up for a credit card, you should understand all of the common terms and learn how to use a credit card. Sadly, many people do not fully understand credit card terms and that’s a leading cause for why some fall into credit card debt.

You should do your research and understand:

While these things apply to all credit cards, not every credit card is the same. So, you should know and understand the terms of each of your credit cards to really avoid this credit card mistake.

I know that the process of researching and understanding these basic credit card principles may seem like a lot of work, but if you don’t understand how your credit cards work, you may wind up in debt or farther into debt than you already are.

Your credit cards can work for you if you are careful, but if you aren’t, they can wreck your finances and your future.

 

2. Buying items when you can’t actually afford them.

Credit cards are not free money, but too many people treat them like they are. If you are using a credit card, you should always make sure that you have the money in cash or in your personal bank account before you think you can afford something.

That jacket, dress, video game, and so on aren’t worth the debt that they may accrue if you use a credit card to purchase them without really being able to afford it.  A simple $50 dress may balloon into hundreds of dollars of credit card debt because of interest fees.

If you are finding that you are struggling with whether or not you can afford something, there are several things you can do.

  • Wait 24 hours, at least, to make that purchase.
  • Think about the other things you could use that money for.
  • Think about how much time you will have to work to pay for it.
  • Think about whether you’ve made a similar purchase that you’ve regretted.

If you just take a minute to think about those four things, you may realize that you can’t actually afford the purchase in the first place.

If you are wanting to get better about tracking your spending, check out Personal Capital. This free online tool tracks your purchases, your debt, investments, and more.

 

3. Forgetting to pay your credit card bill.

This credit card mistake is one that always shocks me. Even if you have the money to pay your credit card balance in full each month, that’s only good if you remember to pay your bill each month. I honestly can’t tell you how many people have told me that they don’t remember to pay their bill each month. And, many of these people could have paid the balance in full!

Paying your credit card bill late can lead to many problems. It can lead to late fees, added interest, and it can negatively affect your credit score.

If this is one of the credit card mistakes you are making, you can set up reminders on your phone, put due dates on your calendar, and more.

 

4. Paying only the minimum payment each month.

This is probably one of the most common credit card mistakes. Some make this mistake because they don’t have the funds to pay their full credit card balance each month, and if that’s the case, you may want to find ways to better assess your purchases before you make them.

Others only pay the minimum because they believe that’s all they need to pay in order to avoid interest charges. YES! Many people actually think this, and this is why #1 in this post is so important. Everyone needs to fully understand what “minimum payment” means and what happens if that is all that you pay.

Here’s a basic breakdown of what minimum payments are:

  • Minimum payments are basically the smallest amount your lender will let you pay each month.
  • Minimum payments lead to paying more in the long run because of interest charges.
  • While minimum payments may keep you in good standing, they can affect your overall credit score.

You should always try to pay more than the minimum. If you do not, you will have to pay interest charges, which may inflate your credit card debt significantly each month.

PAYING ONLY THE MINIMUM IS NOT ENOUGH PEOPLE!

Related: 12 Money Hacks That Will Help You Save More Money

 

5. Spending money you normally wouldn’t spend in order to rack up credit card rewards points.

Credit card reward points are great, but if you spend more than you can actually afford so that you can earn “free” vacations, gifts, and more, nothing is actually free.

Some will spend more money than they have so they can reach the spending requirement needed to earn rewards points. Remember, though, those rewards are only rewards if you are using your cards responsibly.

If this is one of the credit card mistakes that you are making, this can spiral out of control if you do not keep track of how much money you are spending.

To successfully churn credit cards, you must have good to excellent credit scores, have your finances already in order, and have great organizational skills. If that doesn’t apply to you, you can always work on improving your credit score and your financial situation, which starts by first learning which of the above credit card mistakes you might be making.

Do you have credit card debt? Have you ever been guilty of making any of these credit card mistakes?


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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Just got new credit cards and I’m playing my cards by being frugally frugal to the umpteenth power! L ๐Ÿ˜› L

  2. I feel that credit cards should be like spare tires, only in emergencies!

    1. Not quote my friend. You want to have @ least 5 credit cards. Why? Creditors look at you as a “thin file,” if you have little to no credit. Use credit cards but wisely. When you make a purchase with your credit card, pay it right away, They’ll hate you for paying the fall balance right away, but credit card companies have no choice but to report good credit card payment history that’ll in turn boost your credit score almost instantaneously.

      1. Actually I have a very good credit score with 1 credit card and I have only had one for the last 20 yrs. I have had other loans (car loans, mortgage) over the years.

    2. Credit cards definitely aren’t for everyone.

      1. You can say that again Michelle! L ๐Ÿ™‚ L

  3. I like the Dave Ramsey philosophy but I do take it with a grain of salt and keep one credit card. I’ve paid it on time in full for more than a decade except like two times! Once I totally forgot to pay when I was younger and then I just forgot to pay last fall when we were in the midst of celebrating my daughter’s 3rd birthday. I think I just had too much on my brain!

    1. I think that’s normal ๐Ÿ™‚

  4. Mads at ProfitForSaving

    Many people forget about mistake number 2 – and people even sometimes forget about it even if they only have cash, because they, for example, take a payday loan ๐Ÿ™ It is going to be very expensive in the long run!

  5. I currently have a little bit of credit card debt left. It should be paid off by the end of the summer. The only way that this is possible is by me adding more than the minimum to the payment.

    1. Hey Jason,

      Checked out your blog and you have really good content. How long have you been blogging for?

    2. Congrats on almost being credit card debt free!

  6. Not only should you put your credit card bills on auto pilot, paying your utilities, cell phone bills, etc is equally important. Those late fees can add up quickly and you can find yourself paying hundreds of dollars in fees every year!

  7. Dorcas

    Agree with all points especially with # Spending money to get points on your card. This can be risky if you donโ€™t make a plan to pay the card in full. Even carrying a balance to try and develop a good credit history is not the best idea. I agree itโ€™s better to pay off card in full because thatโ€™s the type of habit you want to develop which prevents you from getting into issues down the road