Credit Card Mistakes

15-10-2014 | Ramona |

The past years have showed us that most of us are still not making the best financial decisions and, given the huge amount of credit card debt, we’re clearly making a lot of credit card mistakes that cost us.

In the personal finance blogosphere there are many stories of people who are currently struggling with a lot of debt and a pretty big chunk of it comes from misusing their credit cards (or just being duped by the ‘small print’ and the ‘fear of missing out’ – rewards come to mind).

So, what are the biggest credit card mistakes we can make (or have made)?

1. Getting a credit card ‘just because everybody has one’

If you are living in a ‘civilized‘ country, most of your friends and relatives have at least one credit card. Are you content with your debit card and wouldn’t accept anything but a zero overdraft on your account? You’re not cool, my friend. Even in my country, where credit cards are not being used so much, we still get people to roll their eyes because of how ‘uncool‘ we are.

Don’t make any financial decisions based on what your friends are thinking about you (unless they’re all personal finance gurus and teach you great things ;)).

2. Getting a credit card for the rewards (fear of missing out)

Yes, there are people who have traveled the world or purchased some very cool items with their rewards. They are not many though and a lot of the people who are using their credit cards get into huge debt, just because they lack the discipline to properly manage them and the insane interest some of them have, if you make the slightest ‘mistake‘.

If you are not sure you’ll be able to make ALL the payments exactly as you’d need to in order to avoid the huge interest and fees, SAVE money yourself and leave the rewards to someone else. No bank is preparing the plan for you to get as many rewards as possible, they ‘bet’ on you making a mistake and being charged through your nose.

In my family, we have only debit cards and zero overdraft. Sure, we’re missing out a lot of opportunities (at least that’s how some would say), but we’re not risking anything. By not paying 30% or more in interest, we’re saving money our own way and can travel or purchase the items we’d love to.

Again, if you can ‘play’ the rewards game, good for you, if you have the slightest worry that you won’t be able to keep it up, you’ll never see any rewards, but a lot of time spent paying off your credit card debt.

3. Not reading ‘the fine print’

Me and hubs had a great time joking about a new payday loan system in my country. Let’s say they are so ‘nice’ they approve you IMMEDIATELY, you have to pay weekly (so it’s ‘easier’ on you) and they even come to your home with the money, so no more standing in line waiting to get the cash. Wow, this is great, sign me up for 5 of these

I am afraid there’s no happy end to this story though: you’ll end up paying almost TWICE the amount you borrowed. So, how does 100% interest sound?

Of course, you need to read the fine print. You need to make all kinds of calculations and open your eyes. If not, you’ll open your wallet for a loooong time.

4. Not looking for the best rates

When you get a credit card, this should be done carefully. Do some serious shopping around, compare rates, study the fine print, choose only the best option.

This way you won’t end up in a disastrous situation, but will get a credit card that won’t ruin your financially for the next decade.

5. Getting too many credit cards

I know there are wallets who can carry tens of credit cards, I know people who can fill them easily. Getting too many credit cards is a huge mistake, especially if you cannot be very disciplined with paying them off. This is a recipe for disaster, you’ll end up nose deep in credit card debt and it will take a lot of time and pain to solve your money issues.

6. Making only the minimum payments

Credit cards are clearly a dangerous thing, when not being used correctly. If you’re not paying off the balance each month, you’re gonna pay the minimum for a long time, not to mention you might get the ‘chance’ to pay those nice double digit interest rates, which will erase any rewards value and throw you deep into debt.

7. Paying your credit card bill late

Even worse than focusing solely on the minimum is to pay your credit cards late. Not only will this mean more money you lose on various fees, but this will show on your credit report and damage your FICO score. If you got a credit card just so that you can get a credit score, you’re really damaging any chance of getting a decent loan in the future.

So, always pay attention to the exact date you need to make the payments and don’t be late.

8. Not checking your monthly statements

Sure, you think nobody should make a mistake, we’re in 2014 and the banks have YEARS of experience, right? Wrong! Always check your monthly statement. This can reveal possible mistakes, overcharges from your bank, even ID theft attempts.

We actually had such an instance when my husband had an unusual charge from Las Vegas, when we were actually in Spain. He disputed it and it was all cleared. Sure, it was around 3 bucks, but still, anything that’s not normal, shouldn’t be left there. Maybe the next charge would have emptied his bank account, if the perpetrator noticed the payment was successful and undisputed.

9. Exceeding the credit limit

Credit cards should be used wisely, one of the most costly credit card mistakes is to consider this ‘free’ money. Well, it’s not. You will pay for every mistake and going over your credit limit will cost you. Not only will it make you look silly when your credit card is not accepted for a payment, but you’ll also pay over-the-limit fees.

A bit of discipline and regular monthly statement checking can help you avoid this issue.

10. Getting a credit card to solve your debt issues

In very few instances getting a new credit card to pay off your existing consumer debt works out. And the reason is that you haven’t actually tackled the big issue you have: YOU OVERSPEND.

So, once you are seeing yourself getting in trouble, STOP and don’t dig yourself deeper. You will need to get your spending in check, create a spending journal (so that you can see for 2-3 weeks at least how your spending habits look) and start budgeting drastically.

Only this way, by cutting down any unneeded expenses and being very careful with your spending, you’ll be able to pay off your debt and get back to a ‘healthier’ financial status.

11. Using the credit card to buy all kinds of useless crap

Most people in the civilized world OVERSPEND. Some of us do or did in the past. As mentioned before, this is not ‘free’ money, you need to pay your credit card bills every month and possibly some fees (if you made any other credit card mistakes).

Check your monthly statement and see what you’re spending on. Is there anything you can stop purchasing or any ways to optimize your budget? This will free up money for paying off debt faster or allow you to save more.

12. Using your credit card to pay for every-day items

Sure, if you are VERY disciplined and never miss a payment (or make it too late), you can use your credit cards for every purchase. But, if you fear there’s even a chance to get anything messed up, use cash for the groceries and the credit cards for some more important purchases. Carrying cash might help you more when it comes to refrain from useless purchases, since you can see your money ‘go’ and it clearly keeps you away from mindless credit card spending.

13. Not knowing your interest rate

No, we’re not talking about the introductory rate you’re being offered at first, but the interest rate you are paying once the ‘honeymoon’ is over. A lot of people make this mistake and then are shocked to see how much they have to pay to clear off their credit card debt. Always shop around carefully and read the fine print!

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Recent Comments

  • Julianne F.

    October 15, 2014 at 1:16 pm

    In my case the biggest mistake was to keep on paying the minimum. I thought it’s so clever and it costs me so little. Then I met my future husband and he’s more into the financial stuff than I am. We had an informal chat about our finance and he was appalled to see how little information I had about this 😀

    He advised me to start paying more and get debt free faster. Never would have I imagined that by keeping on paying so little each month I was getting my self deep into debt.

    I still have some debt to pay off (about 5K), but I’m clearly doing better than before I met him.

    • dojo

      October 15, 2014 at 1:21 pm

      Hello, Julianne and thanks for sharing your story with us. I’m sure it’s painful, but I love seeing how you’re already making huge changes.

      Yes, paying the minimum can seem like nothing serious, but it keeps you in debt longer. This is why, if you do use a credit card, it’s wise to make sure you have the full funds at the end of the month, so that you are not left ‘uncovered’.

      If you don’t mind me asking … how much initial debt did you have?

      • Julianne F.

        October 15, 2014 at 1:33 pm

        I don’t mind at all, I had 13,400 in credit card debt. Sure, I didn’t consider this debt, since I was paying the minimum and never missed a payment, but my partner showed me my mistake

  • Nigel

    October 15, 2014 at 4:16 pm

    I am currently debt free, but did get into a lot of consumer debt for not being careful with my overspending. I think this was my biggest mistake (sure, not the only one). I’d just go shopping and charge my credit card without caring about the consequences. Had to lose my job 3 years ago to understand this lifestyle has to stop. It was very difficult at first, but I finally managed to curb my spending and pay off my debt.

    • dojo

      October 15, 2014 at 7:16 pm

      Looks like losing a job really turned our lives around. I was a reckless spender myself, but instantly got ‘cured’ after having to earn money via my own small business 😀

    • rz3300

      August 30, 2016 at 8:37 pm

      Well sometimes it really takes a tough experience to finally make us realize these things. It feels like one of those situations where you really do know it in the back of your head, but you just do not want to fully accept it. I have certainly been there, and it has taken me a kick in the pants (to put it nicely) in order to get my act together and shape up. You live and you learn, though, and that is the name of the game. Thanks for sharing.

  • Petra

    October 15, 2014 at 5:29 pm

    You mentioned you don’t have a credit card (correct me if I’m wrong). What’s the reason?

  • dojo

    December 1, 2014 at 8:36 am

    Back when I used to have a debit card, credit cards were few in my country and the conditions pretty shady. We’re new to all this stuff (less than 25 years), so the banks don’t always offer good deals. Reason why I closed my bank account and am keeping only the business account (which is mandatory here to have). I’d rather ‘play’ with cash than pay more and more commission each day

    • rz3300

      August 29, 2016 at 2:49 pm

      Well that is really interesting. I do not think we really think about all differences that there are depending on where you live, until you really see them like this. There seem to be a lot more hurdles to jump through in order to just manage an account there, let alone get rates for cards or loans. Very interesting to think about, and it makes me appreciate some of things that I probably take for granted. Thanks for sharing.

  • John Dough

    October 17, 2015 at 6:38 am

    100% interest rate?? How is that even possible, or legal, for that matter? That sounds incredibly dangerous. I have had credit card debt in the past and luckily managed to pay it off in time, but my interest rate wasn’t even close to 100% !

  • Bluejay88

    November 15, 2015 at 9:25 pm

    Oh boy. Credit cards.
    Thing is, I’m looking to get approved for a mortgage and I don’t really have any financial history that can help. So, in order to build my credit score, I applied for a secure credit card to get things going. So far, so good, haven’t made any costly mistakes! It’s easy to behave, when you know you have a goal to achieve.

    • rz3300

      September 14, 2016 at 7:35 pm

      Well the only thing I can add here is to be very very careful. This is all from personal experience, though, and while it does not have to do with mishandling the card, it still serves as an overall warning. I took out a card to build some credit and ended up buying a lot more things that I intended to. It was not much, and I consider myself lucky to catch it early and put a stop to it, but it is just an indication of how easily it can happen. Proceed with caution, and best of luck to you.

  • timba

    December 7, 2015 at 10:11 am

    It’s too easy to go overboard, with credit cards. Especially when you get them for their rewards! I have friends who are (and probably will be) forever in debt with the bank. Their excuse: “But the reward is worth it!”. Is it? Really?

    • tabby

      September 1, 2016 at 6:01 am

      I know some people who actually get credit cards just because of the rewards. They fail to realize that it’s not truly wise to be racking up points on your credit card just to obtain rewards. Personally, I don’t think that the rewards are worth it primarily because you are spending on items you don’t need at the moment. The only reason (at least in my mind) on why you purchased the item was to earn points. Ergo, you don’t necessarily need the item. Makes me recall something about “SALE”. People often think that a shoe worth $100 and sold at 25% discount is a steal. It’s only a steal if you need that pair of shoes, but if you’re only buying for buying sake because it’s on sale, what you’re really getting into is SPENDING $75 instead of SAVING $25.

    • rz3300

      September 5, 2016 at 3:16 pm

      Well this is the type of mentality that really escapes me how some people can think like that, but I guess then it is really no surprise that so many people are in debt to these companies. Shoot, if somebody would have told me that you can start a credit company and just dangle rewards in front of people and they will take any rate that you give them, I would ask where I sign up to start making money off of these people. It is a shake my head type moment, but it just emphasizes the need to focus on yourself and your own finances. Glad to hear that you have your head on straight, no so much for your friends though. Thanks for sharing.

  • Sharon

    February 9, 2016 at 2:32 am

    These are some EXCELLENT tips Ramona! Too many people out there spend more than what they can afford so they end up getting into deep debt because they charge on their credit cards and are hit with ridiculous interest fees because they are not able to pay them. Rewards are GREAT if you treat your credit card balances like cash and always pay them off at the end of your billing period. When you let a balance carry over into the next month…not only are you putting yourself in debt but you are wasting money because the interest charges add up over time. For me it doesn’t matter what the interest rates are on my credit cards because I always pay them off at the end of the billing cycle. Interest rates only kick in when you leave a balance on the cards.

  • Mocky

    April 25, 2016 at 9:29 am

    Credit cards come with ups and downs. On one hand, they’re really useful. Say you need to build credit card history for some reason, credit cards will really help if you use them wisely. On the other hand though, like you said, if you’re not careful you can end up in big trouble! Now I’m not the one to judge, but a couple of times I’ve had the ‘pleasure’ of staying in line at the supermarket and the people in front of me couldn’t pay for their groceries because they’ve reached their credit card limit. That’s 2 credit card mistakes you talk about right there! People reached their limit because they pay for every-day items.

  • tabby

    May 4, 2016 at 1:17 pm

    I have a love-hate relationship with credit cards. On one hand, I love the use of credit cards because I can actually purchase the things I need now, but pay it off a month later. In using the cards, I get to earn points and redeem them for certain items. Quite a few times, this work for me and I think it can work for everyone else IF AND ONLY IF you PAY in FULL on the due date. The mistake happens for me, when there is something that comes up and I’m only able to pay a portion of it. I’m aware of the ‘pay only the minimum’ bait, thus I rarely do it. So, that’s when things become problematic. 🙁

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