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10 Biggest Credit Card Mistakes You're Making, Even If You Think You're an Expert

Think you know how to properly use a credit card? Check and see whether you're making one of these big mistakes.
By Maryalene LaPonsie

MoneyRates has partnered with CardRatings for our coverage of credit card products. MoneyRates and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.


Understanding credit cards is part of being financially savvy.

When used properly, a credit card can make your life more convenient and maybe even more rewarding. Many cards offer valuable perks such as purchase protection and trip interruption insurance as well as cash back, rewards points or frequent flyer miles.

However, credit cards can also come with confusing terms and interest rates. It costs you money if you don't understand all the ins and outs of how they're used.

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10 Biggest Mistakes Even Credit Card Experts Make

1. Applying for too many cards

Every time you apply for a credit card, your credit report gets pulled. Too many inquires can cause your credit score to dip.

The credit reporting agency Experian notes that every hard inquiry - which occurs every time you apply for a card - can cause a 5- to 10-point drop in your FICO score. (That's the credit score most commonly used by lenders.)

While a hard inquiry remains on a credit report for two years, only those from within the past 12 months are used in calculating your FICO score.

If you know you'll be applying for an auto loan or mortgage in the near future, it's best to stop applying for cards so hard inquiries won't lower your score and negatively affect your chances of a loan approval.

2. Not maximizing credit card rewards

People may apply for rewards credit cards and then neglect to make the most of them. Maybe they forget to opt into quarterly cash back bonuses - or perhaps they buy supplemental rental car insurance when they already have it for free through their credit card.

At least annually, review all the perks and protections offered by your credit cards to be sure you aren't missing out on any valuable benefits.

If you have a rewards card with quarterly bonus categories, make a note on your calendar to opt into those.

Also, if you have multiple cards, be sure to use the right card for the right purchases. You don't want to be charging your restaurant meal to the card offering 1% cash back if you have another card in your wallet that offers 4% cash back on dining.

3. Carrying a balance to get a sign-on bonus

Many rewards credit cards come with amazing sign-on offers. These give new cardholders the chance to earn tens of thousands of bonus points or miles when opening an account. Cash back cards may offer hundreds of dollars in bonus cash back as well.

However, to qualify for these bonuses, you may have to spend thousands of dollars within three months of opening an account.

If you are comfortably able to spend that much and pay off the balance, then there is little downside to pursuing these card offers.

However, if you carry a balance or have trouble paying your bill, interest charges and late fees can easily wipe out the value of the bonus.

4. Using too much of your credit limit

Just because you have a $5,000 credit limit doesn't mean you should be spending that much each month. If your credit card company reports you have maxed out your limit, then that hurts your credit score.

To maintain good credit, you want to keep your credit utilization ratio at or below 30%. That means you're only using 30% of your available credit at any given time.

If you can get your ratio down to 10%, that's even better for your credit score.

5. Paying an annual fee for an unused card

Many rewards credit cards come with annual fees.

These cards offer great benefits which can be well worth the price. However, spending habits and preferences change over time, and you may find you're traveling less, using different brands or simply have a new card you like better.

If you are no longer using a card regularly, there is no reason to pay an annual fee for it.

Rather than close the account, call the credit card issuer to see if they are willing to waive the fee or can downgrade you to a lower tier card. Many companies offer multiple similar cards with varying levels of benefits and fees.

6. Closing unused credit card accounts

Even if you're not using a card, avoid closing the account. The length of your credit history makes up 15% of your FICO score.

If you close old accounts, your score could drop as a result.

Still, you don't want to pay an annual fee for cards you don't use, so be sure to see if you can downgrade those accounts so they will be free in the future.

Some credit card issuers will automatically close an account after a period of inactivity.

You may want to call your card company to determine their policy. If they do close accounts for inactivity, consider charging a purchase occasionally to keep the card active.

7. Ignoring fees and penalties

What is credit card APR? If you don't know, you could be making a costly mistake.

The APR refers to the interest rate you pay on any balance you carry. While seasoned credit card users may be accustomed to looking at the APR for purchases, they may overlook the other fine print that comes with credit cards.

Credit card interest rates can be different for purchases, cash advances and balance transfers. And what happens if you don't pay your credit card?

There's a higher penalty APR for that on many cards as well.

What's more, credit cards can have late fees, over-the-limit fees, foreign transaction fees, balance transfer fees and other expenses that you should understand before using a card.

8. Only making minimum payments

You might think you're doing okay if you're making minimum payments by the due date each month. However, credit card minimum payment amounts barely cover the interest on some cards.

Take a look at your statement to see exactly how much your credit card debt will cost you if you are only paying the minimum.

Rather than paying minimum on credit card bills, make it a priority to pay off any balance as quickly as possible.

If you have a high-interest credit card, consider looking for a good balance transfer card that will give you an introductory 0% APR while you work to pay off your debt.

9. Missing the best credit card deals

When searching for the best credit cards, be aware that a website that receives compensation from certain card issuers may list those cards first.

Compensation can impact how and where products are placed on a site, and there should be an advertiser disclosure on the page to tell you when a card is being promoted for this reason.

While these sponsored cards may indeed be good deals, don't forget to scroll through the rest of the cards or check multiple websites to be sure you're getting the best card on the market.

Welcome bonus offers may also be different depending on whether you apply directly on a card issuer's website or through a third party.

10. Forgoing credit cards completely

Given that the average credit card debt now exceeds $6,200, you may think it's best to simply skip credit cards altogether.

Doing so could mean you miss out on valuable rewards and perks. Your bank account may also not offer the same liability and purchase protections as a credit card. Beyond that, you risk hurting your credit score.

Upon what does a good credit score depend?

A good score requires that you have a demonstrated history of using credit responsibly. It shows creditors and lenders that you know how to properly use a credit card and will pay back your obligations.

Even if you don't want to charge purchases regularly, good credit can help you get the best rates possible when it comes time to apply for a car loan, student loans or a mortgage.

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