The Top 13 Bad Credit Card Habits
Once you pick up bad credit card habits, they’re very difficult to quit. Unfortunately, bad credit card habits can quickly lead to financial problems. Things like debt, late or missed payments, and a negative impact on your credit score are common consequences. If you want to know if you’ve picked up any bad credit card habits, read on. We’ve rounded up the top 13 bad habits you want to break as soon as possible.
13 Bad Credit Card Habits You Need to Break
1. Overspending
When you get a credit card, especially if it’s your first credit card, overspending is common bad credit card habits. You have the freedom to spend over your means, and this quickly leads to a slippery slope. If there are things you want but you know you can’t afford them without your credit card, wait. If you buy it, chances are you won’t be able to pay it off at the end of the billing cycle. This is how debt starts, and you can quickly get in over your head. Have you done this? You may need to follow this important personal finance tip and consolidate your debt.
2. Paying with a Credit Card Instead of Your Debit Card
It may be tempting to pull out your credit card for every transaction. However, this is an easy way to lose track of your deb. It’s one of the worst bad credit card habits to have. Unless you’re compiling rewards and paying your balance in full each month, you should be using your debit card.
3. Cosigning a Loan
If someone approaches you and asks you to cosign a loan, run the other way. As far as bad credit card habits go, this one can ruin your credit score. You may not realize it, but once you sign your name, you’re on the hook for the balance. If the person you cosigned for should default or quit paying, it’s your responsibility. Any missed or late payments will reflect on your credit history, and it also increases your debt ratio. This is why cosigning is a bad idea.
4. Ignoring Your Credit Card Statements
Yes, creditor mail can be tedious and boring. Unfortunately, bad credit card habits extend to ignoring mail from your credit lender. You don’t want to fall into this trap for a few reasons. Your monthly statement contains important things like charge information. You’re able to monitor your account for unauthorized credit card charges and billing errors. Ignore them, and you could be in trouble.
5. Paying the Minimum Payment
One of the first signs that you’ve developed bad credit card habits is only paying the minimum balance. While this will help you avoid late payment fees and some interest charges, it can easily lead to uncontrolled debt. You can get farther and farther behind by only paying the minimum payments. You’ll also pay interest fees each month you carry a balance.
5. Taking Out Cash Advances
Your credit card is not an ATM, and it’s a bad idea to treat it as one. Taking out credit card cash advances is a sign that you’ve developed bad credit card habits. It also gets you deeper in debt because most lenders charge between 2% and 4$ for cash advance fees. There is no credit card grace period; interest immediately starts accruing. While this may not seem like a lot, it can add up quick as you pay it for every cash advance. Your credit card shouldn’t maintain your lifestyle, and if it does, it’s time to reexamine your purchasing habits.
6. Paying Your Credit Card Payment Late
Everyone forgets a payment sooner or later. But, you shouldn’t let this turn into bad credit card habits. If you just forget to pay your bill, your credit score can drop. This allows your lenders to raise your rates or cut off your credit lines. If you’re having trouble paying it on time due to finances, you may be living above your means. This can lead to deeper debt as you’ll pay late payment or missed payment fees on top of your balance.
7. Carrying a Balance
If you never carry a balance, you won’t have to worry how high your APR is. If you do carry a balance, your APR is critical to know. This extra interest will add onto your balance for each month you don’t pay it in full. A good rule of thumb is to never charge what you’re sure you can’t pay off. If you want something, take a few days and reevaluate. Most of the time, you’ll find that you don’t want it as bad.
8. Applying for the Wrong Card
There are thousands of credit card offers out there, but you don’t want to apply for the wrong credit card. If you read each card’s terms and requirements, you may save yourself a credit check if you don’t qualify. A denial won’t hurt your credit score. But, the credit inquiry can knock your credit score down a few points each time. If you apply for 10 cards, this can knock your score down by 20 or 30 points.
9. Not Having an Emergency Fund
Could you survive with a credit card if you unexpectedly lost your job? If you get into an accident or if your circumstances change, could you handle it financially? Not having an emergency fund leaves you open to having to rely on your credit card. This can quickly spiral out of control because you may not be able to pay your bill. Your emergency fund should be able to sustain you for a few months in the event of an illness or a job loss.
10. Not Using Your Online Account
Your online account is a powerful tool to fight bad credit card habits. It keeps a running record of your transactions, where your money is going, and how much you’re spending. It’s also an easy way to spot unauthorized credit card transactions. If you don’t use it, you may forget transactions or underestimate how much you’ve spent. You may also hit the upper limits of your credit line, and this can lower your credit score. Setting credit card alerts through your online account can help you keep a closer eye on your personal finances.
11. Not Using Your Credit Card
Not using your credit card can be as bad as overusing it. Many credit card lenders have rules on how long a card can go unused before they cancel it. If you don’t use your card for six months or so, you may lose it. Additionally, credit bureaus may ignore them if they sit for too long without activity. You should use your card at least once every three or six months. How much of your credit lines available should you use? Even a small transaction counts.
12. Not Monitoring Your Rewards
The entire point of a rewards card is to cash in the rewards you earn. This is how many people justify the higher annual fee. Losing track of your rewards is a good way to lose them before you use them. Some lenders have expiration dates on unused credit card rewards. Some have rotating categories where you earn more for specific items. By monitoring your rewards, you can cash in before you lose them.
13. Carrying Excessive Credit Cards
How many credit cards are too many? Can you name all of the credit cards in your purse or wallet? If not, it’s time to revise how many you carry. As far as bad credit card habits go, this is a dangerous one. If someone steals your credit cards, you have to alert the banks before they charge purchases. If you don’t know what cards you had, you may miss one. It’s also easier to forget due dates or forget how high the balances are on each card.
The Bottom Line When It Comes to Bad Credit Card Habits
The key to responsible credit card use is not falling into bad credit card habits. It may take a little work, but it’s worth it. You won’t have the stress of trying to allocate money to cover all of your bills. You’ll have healthier finances, and you may even build up an emergency fund.
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