Money Management

Credit Card Mistakes You Can Fix Today

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Credit cards are everywhere, and they are one of the most widely used forms of payment in the US today. Along with the common use and acceptance of credit cards comes the abuse of credit, which leads to debt. The average credit card debt amongst households who are in debt is well over $15,000. At the high interest rates that credit cards carry, this amount of money can take years to pay off and can harm your credit for even longer. Part of the problem is that few Americans are taught how to use credit correctly and what having credit means for your future purchases. For example, one in four consumers said they didn’t know how to improve their credit scores and nearly half of consumers said they did not know that credit history can determine if you are able to get a new line of credit. Using credit doesn’t have to be intimidating and credit can be a powerful tool to help you get the things you need and create a secure financial future. Read on to find my top 5 credit card mistakes that you need to fix today to make sure your finances are secure.

1. Paying only the minimum balance

 Carrying a balance on a credit card from month to month is very damaging to your credit score. One of the main factors that determine your credit score is your credit utilization, or how much of your total available credit from all of your credit cards you use at one time. If you carry a balance over between months your credit utilization remains high, which means you are a riskier account for credit card companies to consider. Most credit experts advise that you should avoid using more than 10% of your total available credit at any one time, and that you pay off your balance every month. Not only can you save money on the interest rates that credit cards charge for carrying a balance but you can improve your credit score.

2. Getting a card just for a discount

 It seems like every retailer has their own store branded credit card that offers a great discount for signing up. I’ve seen offers for between 10% to 30% off your first purchase when you apply for a store branded credit card. While this seems like a great deal, be very careful about signing up for these cards. Each time you sign up for a credit card there is a hard credit check on your credit report, and that lowers your total credit score every time a check is run. On top of hurting your credit score by signing up, in exchange for a one-time discount many of these cards have very low credit limits and charge very high interest rates even compared to other credit cards. If you really want to take advantage of a discount make sure the purchase you’re making is worth it, for example buying a new stove and not a new sweatshirt, and that you only buy what you can afford to pay off that month or before the interest kicks in.

3. You close old accounts

It might seem odd, but one of the worst things you can do for your credit is to close old credit card accounts. While you might think you’re simplifying your life by closing accounts you don’t need, history of credit is an important factor in determining your credit score. The older you account is the higher your score will be. If your card has a low or no annual fee it might make sense to leave it alone and just not use the account instead of closing it. However, if you have an older account with a high fee that you no longer use then it might pay off to close it down and take the hit to your credit score instead of paying an unnecessary fee.

4. You ignore you credit report

 Part of keeping a healthy credit score is monitoring your credit report for errors. Identity theft is rampant and increases every year. One of the easiest ways to spot identity theft is to keep an eye on your credit card statements online to spot unauthorized transactions and notify the credit card company when you find something that looks wrong. The other way to stay on top of your credit score is to get a free copy of your credit report from, which provides you with a free credit report from each of the big three credit bureaus once per year to comply with federal law. Be careful about using other sites as they may require you to enroll on pricey credit monitoring services.

5. Opening too many credit cards at once

Having a large amount of available credit is good for your credit score, but opening a lot of accounts at the same time can actually damage your credit. Every time you open a new account the credit card company performs a hard credit check that is recorded on your credit report. If a credit card company sees too many hard credit checks then it appears that you are desperate for credit and might be a higher risk for paying your bills on time. While there isn’t a set number of too many cards to open at once or how many cards you should have at any one time, a good rule is to aim for less than 20 accounts overall and not to open more than 2-3 new accounts within a 6 month period.