Depending on how you use it, a credit card can be both a blessing and a curse. They are very useful, especially if you are short on cash. Furthermore, these cards provide benefits such as cashback, rewards, travel miles, and purchase protection.

However, if you are already in debt or do not know how to use these credit cards, you might regret signing up for one. Understanding how to use your credit card effectively is critical so you do not put yourself in a financial bind. Overall, you should avoid making the following credit card mistakes.

Carrying a Month-to-Month Balance

One of the most common credit score misconceptions is that carrying a credit card balance improves your credit. But, this costs you money and can harm your credit score.

You will have a higher credit utilization rate if you carry a balance, the amount of debt you have compared to your available credit. The lower your utilization rate, according to experts, the better. According to a FICO study, “high achievers” are consumers with an average FICO score of 800 and use only 7% of their credit limit on average.

Keeping a balance can also be costly due to interest charges. While a cashback card can be a great way to save money on everyday purchases, all your savings are useless if you pay interest.

Closing a Credit Card

One factor contributing to your credit score is the average time you have had credit. When you close a credit card, it affects the average length of your credit history. It is not a good idea to close a credit card, especially your oldest one.

However, there are times when closing a credit card makes sense, such as when you are charged an annual fee that is not outweighed by the card’s benefits.

Failing to Report Stolen or Lost Credit Cards

Credit cardholders must be wary of identity theft as it is a real and potentially serious problem. It can harm your credit rating, cost you money, and cause you a lot of trouble as you work through various bureaucracies to get your affairs back in order.

Losing your credit card is a relatively simple way to become a victim of this crime. The good news is that reporting the card missing to your credit card company is extremely simple. Your card will be canceled immediately, any suspicious purchases will be flagged, and you will be issued a new card.

If your card goes missing, do not wait to report it. Your chances of avoiding malicious actors are better if you do so immediately. Even if your “lost card” eventually turns up in the couch cushions, replacing your card is much easier than untangling a web of fraudulent purchases and repairing a credit rating damaged by identity theft.

Making Minimum Payments Only

It is not a good idea to just pay the amount required monthly based on the statement, even though you must make at least the minimum payment each time.

If you do not pay the total amount due on your bill, you could fall into debt and raise unnecessary interest charges. In addition, making only the minimum payment on your debt can add additional months or even years to the total amount of time it takes to pay it off.

Before you commit to larger expenses, formulate a strategy for how you will pay for them, and be sure to stick to it by making regular and timely payments toward your balance. Do not settle only by making minimum payments for your balance.

Missing a Payment

If you are more than 30 days past due, late or missed payments can seriously harm your credit score. According to FICO data, a 30-day missed payment will result in a drop of 17 to 83 points and a 90-day missed payment will result in a drop of 27 to 133 points.

However, suppose your payment is less than 30 days late. In that case, your credit score will not suffer because payment must be a full 30 days past due before it is reported to various credit bureaus, such as Experian, Equifax, and TransUnion.

You may still be charged a late fee or penalty interest rate, which raises your Annual Percentage Rate. It is best to set up automatic payments to ensure that payments are always made on time. Then, ensure to set calendar reminders and email notifications if autopay is not for you.

Neglecting Billing Statements

Your credit card company will send you a monthly statement via email, paper envelope, or both, which you should always read. This is the most effective way to ensure that your payments are always made on time and correctly.

You will also find information about the expiration of any current offers or introductory APR rates, which can serve as a helpful warning that your rates are about to rise. On the other hand, a good credit spending and payment history may result in a spontaneous increase in your credit limit. Check your monthly statement for this kind of change.

In general, a cardholder should always read their billing statement, even if it is just to ensure all charges are correct and that payments have been applied correctly. Detecting errors or fraud before they become full-blown identity theft can save you time, money, and damage to your credit.

Opening Many Credit Card Accounts

Opening too many credit cards can be tricky. The obvious disadvantage is that carrying many credit cards increases your chances of accruing a large amount of credit debt. You can lower your credit utilization ratio by increasing your overall credit limit, which you can do by opening additional credit cards.

In other words, accepting a new credit card offer under the right circumstances can ultimately improve your credit rating. And, with so many credit card offers on the market, each with its own set of perks and reward programs, many consumers use multiple credit cards for different purposes.

Despite this uncertainty, most Americans see the value in having multiple credit cards. Make sure you select offers based on your needs and keep your spending under control across all accounts.

Paying Medical Bills Using a Credit Card

Medical bills can be costly and overwhelming, especially if you do not plan. If you find yourself in this situation, think about negotiating with the hospital or whoever you owe money to, but do not charge it to your credit card.

Medical facilities are frequently able to provide payment plans with no interest charges. Many people also make the mistake of paying the bill without first reading it. You want to be sure the bill is correct.

Credit card interest rates are frequently high.  As such, paying with a credit card is more expensive in the long run when used to pay medical bills.

Reaching Your Credit Limit

Using the entire amount of your credit limit can harm your credit score and result in high-interest payments. You may open a credit card to give yourself some financial flexibility when paying for large purchases. If you must carry a balance, you should do so with a clear understanding of your credit limit.

While you have full access to this amount, it is never a good idea to “max out” your credit card. If you must use a credit card to make a large purchase, inquire about increasing your credit limit. Raising the maximum amount you can borrow can help you improve your credit utilization ratio.

However, you should proceed with caution when increasing your credit limit. Do not interpret this as permission to increase your balance. The goal is to improve your credit score, not to encourage more credit card spending.

Using Cash Advances

Many credit card offers include two different interest rates and borrowing limits: one for spending on purchases and another for cash advances at an ATM or, in some cases, through a bank teller or check by mail. Almost always, the latter service comes with a lower credit limit, a much higher interest rate, and a slew of additional fees.

The cash advance rate is significantly higher than the average minimum purchase APR, which ranges from 12.85% to 15.99%. Unlike purchases, which can be paid off immediately at no additional cost, your cash advance will almost certainly come with an immediate and fairly hefty processing fee.

A cash advance should only be considered if you are truly in a bind. When it comes to cash advances on your credit card if at all possible, avoid them.

Using a Credit Card for Everyday Shopping

Using your credit card excessively makes it easy to accumulate debt. You should avoid using your card for routine purchases such as groceries, household items, and clothing.

Paying with a credit card for small purchases that should fall within your monthly household budget may expose you to additional interest payments. Using a credit card may cause the same carton of eggs, a gallon of milk, and a package of paper towels to cost more than if you had paid cash.

You should only use a credit card for this type of routine shopping if you stand to gain benefits, loyalty points, discounts, or cashback rewards, and only if you intend to pay off the entire balance immediately. Save your credit card for purchases that either earn you rewards or offer you interest-free introductory repayment as you make larger purchases.


Using a credit card requires self-control, wherein you can enjoy your credit card and maximize its full potential if you practice this discipline. Above all, you should keep your balance under control and within your financial constraints.