5 Easy-to-Avoid Credit Card Mistakes

Credit is great, until it isn’t. Here are five common (and easy-to-avoid) credit card mistakes people make every day.

People rely on certain tools for specific situations. Car won’t start in the winter? Jumper cables. Need to tighten a bolt? Wrench. Your dad is Darth Vader? Lightsaber.

But without a doubt, the most common financial tool people use for unexpected situations is a credit card. We all know its real purpose is for emergencies or larger responsible purchases. While credit cards are a great resource, it’s easy to make mistakes. But the good news is that those mistakes are also easy to avoid.

Check out these five common credit mistakes and learn how to pass them by with credit-building practices.

1. Getting Too Many Cards

Some people accumulate credit cards like dust bunnies. In financial circles, this strategy is known as “not good.” While it may seem beneficial to activate a high number of credit cards and get to work using them on many different purchases, this can negatively impact your credit, especially once the balances start to mount. It’s a good idea to have one or even a few credit cards because it shows diverse forms of credit, but mismanaging the cards means a higher debt-to-income ratio, more annual fees, and potential black marks on your credit history.

2. Paying Only the Minimum

Paying the lowest possible amount on your credit card bill is something you should do only when it’s 100% necessary. But most other times, you want to pay the maximum you can afford on your card. The more you pay off, the less you pay in interest. This always looks good to creditors. Doing this will also extend you the benefits of the card (airline miles, gift cards, etc.), as well as keep your credit in tip-top shape. Online credit calculators can demonstrate the long term damage of only paying the minimum.1

3. Missing Payments

Missing a payment isn’t the end of the world. But nothing good can come from it either. Missed payments mean additional fees, damage to your FICO score, and negative information on your credit report that can remain there for seven years. If you do miss a payment, the best course of action is to pay it right away, even if you’re late. Even better, pre-emptively set your credit card to “autopay full balance” every month.

4. Letting Samuel L. Jackson Tell You Which Card to Get

You wouldn’t know it now, but there was a time when celebrities didn’t try to sell you cards every six minutes on TV. Creditors use robust marketing and promotional engines to publicize their offerings. They want you to activate a line of credit with their card, run up a balance, and pay it back with increasing interest over time. Do your homework and find a card, or cards, whose rates you can afford. It’s important that you meet the providers’ credit-worthiness needs and find a low fixed rate APR. Identifying the right card for you means not being swayed by promotions and benefits which may seem great at the time, but actually won’t do anything for you other than burden you with mounting debt.

5. Not Using a Credit Card at All

This one might seem strange. We know credit cards are fraught with danger and risk, right? Well, not necessarily. Using credit responsibly (not maxing out the cards, making full payments on time) is an important practice that builds positive credit history. Avoiding it all together means that when you go to make a larger purchase like a home, car, or mega-yacht, you won’t have a clean, responsible-looking credit history to point to. Use credit cards responsibly and you’ll look credit-worthy to lenders.

So What Happens When You Make Those Credit Card Mistakes?

Using a credit card can feel easy… sometimes too easy. Using credit and credit cards well is a little more difficult. That’s why many of us end up making these simple credit card mistakes. So what are the consequences of getting too many cards or missing those payments? The answer is simply bad credit. Your FICO score will take a hit, resulting in a lower credit score and decreased access to affordable credit. For this reason, many people with bad credit turn to dangerous bad credit loans or “no credit check loans.” These are often dangerous financial traps that can walk you into predatory loans you can’t really afford. These kinds of predatory loans can take your bad credit situation and make it much, much worse.

For these reasons and more, it’s important to use and manage your credit and credit cards wisely. You can learn more about the responsible use of credit cards in our ebook “Credit Workbook: The OppLoans Guide to Understanding Your Credit, Credit Report and Credit Score.”

Credit Cards are an important resource that can improve your life and your finances, but they also come with risks. If you have a specific financial need, opening another credit card may not be the answer for you. OppLoans offers safe, reliable and credit-building installment loans with affordable, fixed monthly payments. Apply today and qualify within minutes to receive your funds as early as the next business day.

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Works Cited:

1 Maluth, Hannah. “8 common credit card mistakes you might be making” USA Today, July 24, 2017, https://www.usatoday.com/story/money/personalfinance/2017/07/24/8-common-credit-card-mistakes-you-might-making/500610001/. Accessed September 11, 2017.