Top Credit Card Mistakes to Avoid

Smiling young black couple using credit card to make online purchases

If you are looking to get a little boost to your credit, or if you have little to no credit, people always say the best thing you can do is get a credit card. Having a credit card establishes and starts building credit. While this sounds great, new credit card users can become quickly overwhelmed and find themselves in credit card debt. When used responsibly, credit cards are great, but here are some top credit card mistakes you should avoid.

Avoid applying for multiple cards 
Applying for multiple credit cards in a short time frame will actually damage your credit. If you are opening a credit card to help build your credit this will do the opposite. Less is more when it comes to credit cards. Every time you apply for a credit card the lender does a hard inquiry which actually lowers your score a few points. Too many of these at once and you can see your credit score drop significantly.

Make more than the minimum payment 
It can be tempting to just make the minimum payments on your credit card, but by doing that you are increasing the amount of interest you will pay overall on the balance. This means that you end up paying more in the long run for items purchased with a credit card.

Avoid late payments
While this seems pretty self-explanatory, avoid paying your credit card late. Be mindful of payment dates, and that payments can take time to process and post to your account. A good practice is to pay your bill as soon as you receive the statement, that way it doesn’t get lost in the shuffle.

Don’t max out your available credit
Just because you have a $5,000 limit doesn’t mean you should charge $5,000 on your card. Maxing out your available credit actually reflects poorly on your credit. A good rule is to not spend more than 30% of your available credit.

Don’t take out a cash advance
Cash advances have a much higher interest rate than normal purchases and usually come with their own set of fees. If you need cash during an emergency a cash advance can seem tempting but it will actually just put you further behind.

Wait to cancel your card
When people start getting into trouble with credit cards they think the best course of action is to cancel their card. Doing this actually shortens the length of credit history and reduces your credit utilization (remember the 30% of available credit. Cancelling a card reduces your available amount). Your best option is to not use the card while you pay down the balance.

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