Credit cards that people make mistakes with.

Common Credit Card Mistakes

Credit cards are a wonderful tool for improving your credit score and can even be used as a financial aid. Powerful tools like these can often be abused and misused. Take a look at some of the most common credit card mistakes that people make. How many are you guilty of?

Here are 9 of the most common mistakes made with credit cards.

1) Carrying A Credit Card Balance

Top on the list of credit card mistakes is carrying a balance. It is all too easy to pay it with plastic. We have less attachment to our credit cards than we do with cold hard cash. In fact, it has been proven that people spend far more money when they charge it versus using paper money.

If you pay your bill off every month, this is not a problem. In fact, if you are disciplined and use a reward card, it can even be good for your finances. Who doesn’t like getting 2 percent of their spend back every month.

The problem comes when you get the bill and only pay the minimum charge. All that does is pay off a few dollars more than the interest charge. With average credit card interest in  this country at 17 percent, that is quite a bit of money.

If you do not pay your balance off every month, you can quite easily find yourself with thousands of dollars in debt in no time at all. So, avoid this mistake and pay those credit cards off.

2) Not Keeping An Eye On Your Account

Credit card numbers are stolen all of the time. It could be from a gas pump skimmer or from a website hack. Whatever the case, when they are stolen, you need to act quickly. This means that you need to identify the problem as soon as you can.

One of the best ways to do that is to simply check your online account often. Look at the pending section and look for strange pending transactions. Criminals will often test a card before they sell it or charge it up. By checking your account, you can spot these small authorizations and cancel your credit card before any real damage is done.

Check your accounts daily and look for problems. It is just a minute out of your day and it could save you a lot of trouble.

3) Closing Paid Off Cards

You made it a goal to pay off your credit cards and you reached it. Congratulations. Now, you want to make sure that you never get in debt again, so you close those credit card accounts. Big mistake.

What you have just done is lower your available credit and decreased your credit diversity. This will cause your credit score to decrease. It could be a few measly points or it could drop 30 points overnight.

Unless your credit card has an annual fee, keep it open. Also, be sure to use it for a small transaction once every 6 months. This will keep the credit card company from closing it, which is something they do to inactive accounts.

4) Not Negotiating

That interest rate you received might not be the best that you can get. After you open a new card, use it a few times to prove that you are a good customer (pay off the balance monthly of course). Then, call the credit card company and ask for a rate reduction. More often than not, you will get it.

This works for cards that you already have as well. Take an inventory of the rates you are paying and make a few phone calls. It never hurts to ask.

5) Using Your Card For Cash

One of the worst credit card mistakes that you can make is to use your credit card to get a cash advance. It immediately defaults to the highest interest rate and there is often a fee, both with your credit card issuer and the ATM you use to get cash.

If you absolutely need cash, try using your credit card to pay for one of your regular bills. Pay your 200 dollar electric bill with credit and then take the cash that you would have used to pay the bill and spend it. This will save you from fees and from paying max interest.

6) Not Paying Your Bill ASAP

If you carry any balance at all, pay your bill as soon as possible. This is for two reasons.

For starters, if interest is compounded daily, it could save you money. If your bill is due on the 15th and you pay it on the 1st, you could potentially save yourself 14 days of interest charges.

In addition, if you wait until the last day and a problem pops up with your bank, you could end up with a late charge. Pay your bill early for a bit of peace of mind.

7) Using Your Card To Live Outside Your Means

You should never purchase something with a credit card that you could not just as easily purchase with cash right this second. This would keep you from being able to pay off the card when you get your statement.

Living outside your means with the use of credit never works out. You might think that your income will eventually catch up and you will be able to escape your debt, but this almost never happens. What will happen is that your debt will build and eventually, you will be living a lower standard of life because of it.

Credit cards should only be used as a temporary convenience, not a way to get an apple watch that you would not otherwise be able to afford.

8) Not Taking Advantage Of Balance Transfers

If you have good credit and you are working on paying down your debt, a good tool is low or no interest balance transfer offers. A period of low interest could do wonders for your debt, allowing you to use money that would have been lost in interest to pay down principal.

A word of caution though. Do the math and make sure that the low interest period is worthwhile. Sometimes these offers come with balance transfer fees that can negate your savings.