Using your credit card wisely in a way that improves your credit score can be trickier than you think. It is much easier to make a mistake with your credit card that will lower your credit score and cause you to be charged a higher rate for credit products, insurance, and housing. There are some credit card mistakes that have financial consequences that reverberate for many years after the initial action. Here are the credit card mistakes that tend to cost you the most over time.
Maxing Out Your Credit Card
Maxing out your credit card or spending very close to the total credit limit can be a very costly mistake. When you max out your credit card, you are being charged a significant amount of interest on the balance you are carrying and paying the minimum payment will barely budge the total amount that you owe. Maxing out the credit card also increases the chances that you will go over your credit limit, causing an immediate, dramatic drop in your credit score. If you find yourself carrying a balance on the credit card from month to month and getting close to your balance, take the card out of your wallet and do not place any more purchases on the card until you have paid down the balance.
Being More Than 30 Days Late On A Payment
Making a payment a couple of hours or days late will have an impact on your credit score, but not nearly as big of an impact as making a payment more than 30 days late. Making payments more than thirty days late is a big red flag to potential creditors that you do not have the funds to cover the credit that you have used and your credit score will reflect this by dropping considerably. In addition to the reduction in your credit score, the negative information about the missed payment will remain on your credit history for seven years or more. To avoid this mistake, try to pay your credit card bill as soon as it arrives in the mail. This makes it less likely that you will forget about your payment until your next statement arrives.
Taking Cash Advances
A cash advance from a credit card is very expensive, often having an interest rate that is much higher than the rate that you are charged for purchases. If you carry a balance on your credit card, you could be paying hundreds more in interest over the course of a year due to the higher rate charged for cash advances. Avoid taking cash advances with your credit cards at all costs and make sure you are saving money in an emergency fund so you will have the cash that you need in the event that you must pay cash to solve an issue.