12 Credit Card Mistakes You Don’t Realize Are Draining Your Wallet

Some of us get quite a thrill when we swipe our credit card and buy something we really want but don’t actually need. But, while scanning that credit card may be exciting, it can get you into some serious trouble. 

Credit cards are super convenient, letting you get what you want immediately instead of waiting around. But when you use your credit card too often, some steep bills will start piling up in your mailbox, and you will need to pay attention to them. To avoid total financial ruin, you must look at these 12 serious credit card pitfalls and mistakes that many of us make. Once you really understand how your credit card works and how it can impact your life, you will be better equipped to use it correctly and wisely. 

Note: The content of this article is for informational purposes only and is not a substitute for professional advice. Always consult with a qualified professional for advice tailored to your individual circumstances.

Interest Rates

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If you always have a balance on your credit card, you will need to pay a monthly interest rate. These interest rates vary from card to card and depend on your credit score. Before you sign up for a credit card, make sure you shop around and look for the one with the lowest interest rate offered to you. Whenever you swipe that card, remember that you will have to pay interest on every credit card bill unless you pay the entire balance every time. To avoid paying large amounts of interest on your credit card bill, make sure you can pay the whole bill every month, making your credit card balance $0. 

Late Payment Penalties

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In addition to interest payments, you must pay flat-rate fees if you are late paying your credit card bill. This late fee can be anywhere from a few dollars to a few hundred dollars or more! Avoid paying unnecessary late fees by simply paying your credit card bill on time. Even if you only pay the minimum, you will avoid being fined. 

Payment Processing Delays

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When paying your credit card bill, you should always be aware of major holidays and weekend delays that may occur. While you think you are paying your bill on time, it can take a day or two for the credit card company to receive your payment. This delay can result in late fees and penalties. Pay your credit card several days before the due date to avoid processing delays and fines. 

Decreased Credit Score

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If you consistently miss credit card payments or spend until you reach the max on your credit card, it can seriously drag down your credit score. Your payment history and credit utilization are major factors in your score. Constantly making late payments or carrying high balances can send your score straight down. A low credit score may make getting approved for loans, mortgages, or even new credit cards harder. Always make sure you are able to make payments on time and avoid overspending as much as possible. 

Ability to Overspend

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Credit cards are a very tempting tool. It is so easy to see something you want, reach into your wallet, and swipe. But that instant gratification is not worth the unaffordable credit card bill you receive later. It is very hard to resist the urge to buy whatever you want and just put it on your credit card. Only buy something if you know you will be able to pay for it before your next credit card cycle ends. 

Minimum Payment Traps

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While your credit card company may only ask you to pay a minimum fee, this bad habit can put you into debt for years. Paying just the minimum will barely chip away at your principal balance. You will be paying mostly interest and your bill will likely go up and up each month. Try to pay off as much of your balance as possible each month or at least more than the minimum. Setting up automatic payments or creating your own budget to tackle your credit card debt can help you stay on track and out of the trap.

Cash Advance Charges

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Using your credit card to get cash may seem like a nice feature. You have access to cash whenever you need it! But this instant money comes with very high fees. Unlike regular purchases, interest on cash advances often starts accumulating immediately, making it one of the most expensive ways to access cash. Never use your credit card for cash withdrawals if possible. Always consider other options like personal loans or tapping into emergency savings instead.

Annual Fees

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Here is another credit card fee you need to watch out for! Many cards now charge a set annual fee that you need to pay just for the privilege of having the credit card. These annual flat-rate fees are automatically added to your card, letting you keep using it but at a cost. Make sure you know when your annual fee will hit your bill so you can be prepared to pay. 

Balance Transfer Fee

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Are you ready for another type of credit card fee? They just never end! It may be a good idea to transfer the balance of one credit card to another with a lower interest rate. However, you should expect to pay a fee for this transfer. Just make sure that the amount you will be saving by paying lower interest is enough to cover the transfer fee. 

Introductory Rate Expiration

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Many credit cards offer a nice, low introductory interest rate. While it is fantastic to have a card with a super low rate, make sure you know when this low rate ends. Many cards offer low rates only for a few months or for one year, and then the interest rate will skyrocket. Make sure you pay your credit card balance to $0, or make it as low as possible before the rates go up. 

Limited Rewards Options

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There are so many credit cards out there that offer fantastic rewards. From cash-back deals to free balance transfers, you need to take advantage of all those possible rewards! One of the biggest mistakes you can make with a credit card is ignoring your card’s rewards plan or choosing a card that doesn’t offer any rewards at all. Make sure to review all the rewards and take full advantage of every single one. It is one of the biggest positives about having a credit card! 

Credit Card Fraud

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Credit card fraud is very real and something many people are subject to. Always make sure you review your credit card bill in full, assessing every charge and making sure you authorize each purchase. Report any unusual behavior immediately and only shop on secure websites or at trustworthy stores. Avoid using public Wi-Fi when making purchases, as hackers can easily get your information this way. You should also set up alerts for transactions so you’re instantly notified of any activity on your account.

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