A credit card is a great asset, but when you use it incorrectly it can cost you a pretty penny. Carry a balance and pay high-interest rate charges. Miss a payment and incur a late fee. Close a credit card and ding your credit score. The costs add up quickly.

But it’s not hard to get into the habit of using your credit card correctly. And as a result, you can save money while building credit and maybe even take advantage of some sweet perks along the way.

These mistakes will be mentioned here, and solutions will be provided so that you can make full use of your credit card.

• 10 Credit Card Mistakes you Might be Making
• What Happens if you Make a Mistake on a Credit Card Application?
• 7 Credit Card Application Mistakes You Want to Avoid
• What are Common Pitfalls Associated With Credit Cards?
• What is the Best day to pay Credit Card?
• Should I pay my Credit Card in Full?

10 Credit Card Mistakes you Might be Making

1. Carrying a balance month-to-month

One of the biggest credit score myths is that carrying a balance on your credit card improves your credit. In fact, 22% of Americans carried a balance thinking it would increase their credit score.

Read Also: Ways to Earn More Credit Card Points

In reality, carrying a balance month-to-month hurts your credit score and costs you money. If you carry a balance, you’ll have a higher credit utilization rate, which is the amount of debt you have compared to your available credit.

Experts agree that the lower your utilization rate, the better. A FICO study found “high achievers” — consumers with an average 800 FICO score — on average use a mere 7% of their credit limit.

Carrying a balance can also get expensive thanks to interest charges. And while a cash-back card can be a great tool to help you save money on your everyday spending, all that savings is for nothing if you’re paying interest.

2. Only making minimum payments

While you should always make at least the minimum payments, it’s not advised to only pay the minimum due. Not paying your bill in full can lead you to fall into debt and rack up unnecessary interest charges. Plus, just paying the minimum can add months — even years — to the time it takes you to pay off debt.

Have a payment plan in place before you take on bigger expenses, and always make consistent, on-time payments toward your balance.

3. Missing a payment

Late or missed payments can seriously hurt your credit score if you’re more than 30 days past due. You can expect a drop of 17 to 83 points for a 30-day missed payment and a 27 to 133 decrease for a 90-day missed payment, according to FICO data.

However, if your payment is less than 30 days late, you won’t see a drop in your credit score since a payment has to be a full 30 days past due before it’s reported to the credit bureaus (Experian, Equifax and TransUnion). But you may incur a late fee or penalty interest rate — which raises your APR.

Set up autopay to ensure payments are always made on time. And if autopay isn’t for you, set calendar reminders and email notifications.

4. Neglecting to review your billing statement

It’s important to check that the transactions listed on your bill are accurate so you can take early action against fraudsters or reporting errors. At the very least, you should review your monthly statement for errors. But it’s a good idea to check your transactions a few times each week to verify everything looks OK.

You should be proactive about reviewing the charges that appear on your account so you can potentially spot fraud early and resolve any incorrect charges.

5. Not knowing your APR and applicable fees

When you apply and are approved for a credit card, you receive a long cardmember agreement that probably doesn’t top your must-read list. However, it’s important you parse through the jargon and review important account terms, so you understand all the applicable fees.

Here are some key terms to look out for and what they mean:

• Annual fee: The yearly fee charged for holding a card.
• Purchase APR: The annual percentage rate is the yearly interest rate purchases are charged when you carry a balance month-to-month. Simply divide by 12 to get the monthly interest rate.
• Balance transfer APR: Often the same as the purchase APR, this interest rate applies to balance transfers.
• Penalty APR: Card issuers may penalize you with an interest rate that’s higher than your regular APR when you pay your balance late.
• Late payment fee: If you pay late, you’ll incur a fee up to $29 for first-time instances and up to $40 for subsequent violations made within six billing cycles. Some cards waive this fee.
• Foreign transaction fee: Purchases made outside the U.S. often incur a fee, typically 3% per transaction.
• Balance-transfer fee: When you transfer debt, you’ll often incur a 3% to 5% fee.

6. Taking out a cash advance

Perhaps one of the riskiest things to do with your credit card is to take out a cash advance. Interest starts accruing on the amount of cash you withdraw immediately — there’s no grace period like regular purchases. And you’ll likely incur a cash advance fee, which can be around 5% of the advance.

7. Not understanding introductory 0% APR offers

Many credit cards come with introductory 0% APR offers, where you won’t be charged interest on new purchases, balance transfers, or both, for a set time frame. These offers can be a great way to pay for expenses over time without incurring interest charges.

However, you should review the fine print associated with the offers to know exactly when the intro 0% APR period begins and ends, as well as the terms once the offer ends.

8. Maxing out your credit card

Using the majority, or all, of your available credit is never a good idea. Your utilization rate will be very high, which can lower your credit score. The amount of credit you use plays into your utilization rate, and, like we mentioned above, the lower your utilization the better.

If you find yourself frequently charging close to your limit each month, and you have no problem paying off your bill, then you can call the credit card company and ask for a credit increase.

9. Applying for new credit cards too often

Each time you apply for credit, a new inquiry appears on your credit report. The more inquiries in a short period of time, the greater risk you appear to lenders.

Try to only apply for credit as needed, ideally not more than once every six months. Take advantage of pre-qualification forms, which allow you to check whether you may qualify for a card without damaging your credit.

10. Closing a credit card

The average length of time you’ve had credit is one factor making up your credit score. When you close a credit card, the average length of your credit history is affected.

For example, if you have a card that’s 5 years old and a card that’s 2 years old, you’ve had credit an average of 3.5 years. If you close the 5-year-old card, your age of credit decreases to 2 years.

It’s generally not advised to close a credit card, especially your oldest card. Although, there are times when it can make sense to close a credit card, such as when you’re charged an annual fee that isn’t outweighed by the card’s benefits.

What Happens if you Make a Mistake on a Credit Card Application?

When you complete a credit card application, you will be required to sign the document to confirm the information is accurate and to the best of your knowledge. Any error on the application makes the application void. Depending on the type of error, you may find an easy fix.

If you intentionally provide false information in order to secure the card, you may be subject to criminal penalties. Simple mistakes that do not affect your ultimate ability to receive credit can be easily corrected.

Providing False Information

The largest factor used to determine whether you should be held accountable for the false information is whether or not it affects your ability to get the credit line. There are some items that directly affect this decision:

• Social security number or tax payer ID – Providing the wrong identification for a credit check is potentially harmful for your credit application. Many banks or creditors will interpret this as identity theft. Identify theft is punishable by law. If you have made this error, contact the company immediately. Request to cancel the application before it is processed.
• Incorrect income or financial information – Your financial information, such as how much you earn or your bank account numbers, must be accurate. If you make a mistake in this area, cancel your application immediately to avoid any accusations of fraud.

Negligent or Unintentional Errors

While financial information is extremely important on a credit application, some personal information is not. If you mistakenly entered incorrect personal information, you may be able to submit a correction without cancelling your application.

• Address, phone number and other information – If the information you entered is subject to change, such as an address or phone number, it is very easy to change the application.
• Employer information – This part gets a little tricky, because the lender may think you misstate an employer’s information in order to withhold income or employment information. You will need to provide the lender with the correct information immediately to prevent rejection of your application. Employer information can include an incorrect address or phone number.
• Reference information – Any details you provided for required references should be double checked for accuracy. If they are incorrect, quickly rectify the situation so your lender does not reject your application.

Ultimately, your loan application is like a job application. You should fill it out carefully as mistakes will reflect poorly on you. If you have a very good credit score and a high income, these mistakes are largely not a huge issue.

However, for borrowers who are already stretching to apply for credit cards, avoiding errors is crucial. A correct application will show you are responsible and taking the credit process very seriously.

7 Credit Card Application Mistakes You Want to Avoid

Applying for a credit card is a pretty easy process. If you’re applying online, you just complete the form and press the send button. Even though applying for a credit card doesn’t require a lot of effort, there’s still a possibility for mistakes. And if you’re not careful, these mistakes can be costly.

Applying for the First Credit Card You See

You may see a commercial for a credit card that sounds like a great deal. Or, you may receive a pre-approved offer in the mail and the card sounds just too good to be true. Before you put in the application, consider that this card may not be the best deal out there.

There are dozens of credit cards on the market so you should never apply for a card – no matter how attractive it seems – without looking at your other options. You can always come back and apply for that card if you don’t find anything better.

Not Shopping Around

Since there are so many choices for credit cards, you have to look at a few others before making a final decision. If you know how to use a search engine, you can easily find and compare various credit cards. You may, for example, compare all credit card from a certain credit card issuer.

Of, you can compare cards based on the interest rate or rewards. The key is to be sure you look at the terms and benefits of multiple credit cards before making a final decision.

Not Reading the Credit Card Terms

Credit card issuers are required to display the cost information on every credit card offer. Don’t rely only on the name of the credit card or the initial advertisement to give you all the information you need about that credit card. Click through to find out the interest rate and fees on the card so you’ll know how much the credit card will cost.

Applying for a Credit Card With Terrible Terms

Ideally, you want the lowest interest rate credit card with no annual fees and impeccable rewards. While people with bad credit typically don’t qualify for the best credit cards, that doesn’t mean you have to accept a credit card with an extremely high-interest rate or high annual fee.

That’s why shopping around is important. If you’re seriously considering a credit card with worse terms than the other cards on the market, you should look elsewhere. Worst case scenario, apply for a secured credit card which will require an upfront deposit, but there are many good secured credit cards out there.

Choose a Credit Card Based Only on the Initial Benefits

Some credit cards lure customers with an introductory interest rate, signup rewards bonus, double rewards, or no annual fee in the first year. The trick is to get you hooked into the credit card with the hopes that you’ll stick around for the more expensive, less beneficial year two.

Before you sign up for a credit card with great year one perk, consider what the card will cost and benefit you in the second year and beyond.

Applying for Several Credit Cards in a Short Period of Time

Credit card issuers don’t look favorably on multiple credit card applications within a few days, months even. Your first application may be approved, but your chances of getting approved go down with each subsequent application.

Space out your credit card applications, not only to help your odds of being approved but also to ensure you’re taking on a large risk of credit card debt.

Assuming You’re Going to Be Approved

An excellent credit score or high income won’t guarantee that your credit card application will be approved. A high level of debt, recent delinquencies, or recent applications for credit could lead you to be denied. If you are denied, the credit card issuer will send a letter telling you the specific reasons for your denials.

What are Common Pitfalls Associated With Credit Cards?

No one signs up for a new credit card expecting to get into debt they can’t afford to pay their way out of, but it happens often. It’s easy to make a laundry list of mistakes with your money if you don’t pay attention.

Keep your focus on these common credit pitfalls to avoid them in your own personal finances.

1. Temptation to overspend

One of the most common problems with credit cards is a self-inflicted one. While credit cards make it very easy to spend up to the credit limit, it doesn’t mean we should do so. Not only is that bad for your credit, maxing out your credit cards is also probably out of your budget to pay off.

It’s important to know your habits and stick to a budget if credit cards are part of your regular spending plan. Don’t rush out and buy that new TV, designer accessory, or fancy new gadget just because it’s within your limit. Only buy what you can afford to buy with cash.

2. Not paying off cards in full

If you pay off your credit card statement balance in full by the due date, you don’t have to pay any interest. If you use a card right, you’ll never pay for anything outside of an annual fee. But if you pay just the minimum balance or leave any portion unpaid, you’ll pay interest at the card’s annual percentage rate (APR).

Credit cards often charge 20% or more in interest. This is a huge cost that shouldn’t be taken lightly. You don’t get anything back in return for credit card interest. If you’re not careful, you could find yourself paying for that TV or vacation several times over in interest costs.

3. Late and missed payments

It takes years to build an excellent credit score and only a few small mistakes to ruin one. The biggest factor in your credit score is your on-time payment history. Just one late payment can do serious damage to your credit. That’s why you should do everything you can to pay by the due date every month.

Automatic payments are an easy way to avoid missing a payment date. I have several cards, and I use some of them just for some smaller subscription costs to keep them active.

Those accounts are all on auto-pay so you never have to worry. You can pay off your primary credit cards weeks before the due date but do so manually to avoid accidental overdrafts due to payment timing.

4. Privacy concerns

Financial companies are required to send you privacy statements each year. When you read them, you’ll find that the bank or lender can share your contact information for partnerships with other companies. That might mean selling your name and address for advertising.

You usually have the ability to opt-out of some sharing, but not all. And you usually have to jump through a few hoops to do it. Changes on your credit report may also increase your credit-related junk mail, which puts you at some risk for identity theft if someone steals your mail.

Make sure to opt-out where you can and consider calling to get your name off of lists to increase your information privacy.

5. Changing minimum payments

Installment loans give you a fixed, predictable monthly payment. That’s true here at Self as well as with the most popular types of mortgages, auto loans, and student loans. Some loans, like credit cards and some home equity lines of credit, may have a different payment amount every month.

Revolving credit accounts give you the ability to add to the balance and pay it back off repeatedly. If you pay the account off in full every month, you can avoid interest.

But you will also see a different bill amount that isn’t always predictable unless you stick to a tight budget. If you carry a balance, your payment can change with market interest rates. The cost of carrying a balance is another motivator to keep the account paid off.

6. Harder to pay off than you expected

If you have a credit card, you might want to use it for a splurge purchase just once. But if that one time is for a large purchase, you may find it harder to pay off than you realized. This is even worse with ultra-high-interest debt like payday loans.

Credit cards, and many payday loans, give you the option to pay off a purchase over time. This can be useful for managing cash flow. Credit can also help you navigate a job change or temporary financial strain. But paying off a balance when you are already on a tight budget can be a real financial hardship.

7. Fees

Finally, be on the lookout for fees. Credit cards can charge annual fees, late payment fees, returned payment fees, cash advance fees, balance transfer fees, overbalance fees, foreign transaction fees, and other charges. Other than from annual fees, you can avoid just about any fee your card charges.

Make sure to read the fine print and avoid paying more than necessary. Annual fees on rewards cards can be worthwhile if you get more in return than the cost. However, if a card charges more than you get back in cashback, miles, or points, you should consider downgrading to a no-fee card or closing the account.

What is the Best day to pay Credit Card?

Some people pay their full balances every month by the due date listed on their credit card statements. Others carry a balance from month to month but make the minimum required payment at some point before the deadline. So when’s the best time to make a credit card payment?

Why It’s Important to Pay Bills On Time

Most lenders use the FICO® scoring model to assess credit scores. Under that scoring model, 35% of your credit score depends on your payment history. So if you have a record of making late credit card payments, that can ding your score.

There’s another reason why you should make paying off your credit cards a priority. A credit card is a type of revolving credit account. Unlike installment credit accounts – like mortgages and student loans – revolving credit accounts allow you to borrow money whenever you need it up to a certain threshold (your credit line).

There’s no fixed monthly payment and you can carry a balance from month to month by not paying your bill in full.

When it comes to your FICO® credit score, revolving debt typically carries more weight than installment debt. So while making any kind of loan payment after its due date can hurt your credit score, late credit card payments can do more damage to your credit.

The amount of debt you owe accounts for 30% of your FICO® credit score. An important part of that variable is the credit utilization ratio (the amount of credit you’ve used compared to your credit line) associated with your revolving credit accounts.

That means your credit score could take a serious dive if you miss your credit card payment deadlines and you’ve used a significant portion of your available credit line.

The Case for Making Early Credit Card Payments

While it’s a good idea to pay your credit card bill when it’s due, making an early credit card payment can work in your favor. To understand why, you’ll need to know how your billing cycle works.

Credit card billing cycles often last for 29 to 31 days. The last day of your billing cycle is called your statement closing date. Whatever credit card balance you have on this day is usually the balance that your credit card issuer reports to the credit bureaus.

Your closing date isn’t the same as your payment due date. After all, your credit card payment technically isn’t due until the end of a 21- to 25-day period known as the grace period.

By making a credit card payment before the closing date, you can make it seem as though you’ve racked up less credit card debt. For instance, let’s say you have a credit card with a $3,000 credit limit. If you spend $2,500 but pay off $1,700 before the closing date, the credit reporting bureaus will think you’ve only spent $800.

Why is that a good thing? Based on our example, the credit reporting bureaus would think that your credit utilization ratio is 26.7%. Lowering your credit utilization ratio can improve your credit score. If you want a better FICO® score, it’s best to keep this percentage below 30%.

When You Should Make a Credit Card Payment

You’ll be in good shape if you can pay off your credit card by the due date, especially if you pay your entire balance. Paying at least part of your bill before the closing date could be even better if you want a good credit score.

But the best time to make a credit card payment may be whenever your credit utilization ratio exceeds 30%. By tracking your credit utilization ratio and keeping it as low as possible, you can protect your credit score. And you won’t have to worry about remembering the date when your credit information will be reported.

To calculate the credit utilization ratio for an individual credit card, you can take your credit card balance and divide that number by your credit line. Then multiply that number by 100.

Credit reporting bureaus also consider your overall credit utilization ratio. If you have multiple credit accounts, that’s equal to the sum of all of your credit card balances divided by your total credit limit.

Trying to figure out the best time to pay off your credit card? To avoid paying interest and late fees, you’ll need to pay your bill by the due date. But if you want to improve your credit score, the best time to make a payment is probably before your statement closing date, whenever your debt-to-credit ratio begins to climb too high.

Should I pay my Credit Card in Full?

If you’ve come across extra cash and have credit card debt, you may wonder whether it’s a good idea to pay off your balance all at once or over time. You may have heard carrying a balance is beneficial to your credit score, so wouldn’t it be better to pay off your debt slowly?

The answer in almost all cases is no. Paying off credit card debt as quickly as possible will save you money in interest but also help keep your credit in good shape. Read on to learn why—and what to do if you can’t afford to pay off your credit card balances immediately.

Does Paying Off Credit Cards Slowly Help My Credit Score?

It’s an oft-repeated credit myth that carrying a credit card balance helps your credit scores. In reality, high balances on revolving credit accounts can mean high credit utilization, which can hurt your credit standing.

Read Also: Credit Cards With Rewards Systems

Your credit utilization ratio is a comparison of your credit card balance to your total credit limit, expressed as a percentage. It’s the second most important factor in your credit score calculation, making up 30% of your FICO^® Score^☉ .

To calculate it, divide your total credit card balances by your total credit card limits. The lower the ratio is, the better for your credit health. Keep it under 30% to avoid hurting your scores; experts suggest keeping it under 7% for the best scores.

The effect credit utilization has on your credit scores is a strong argument for paying off your credit card balances every month—but it’s not the only one. Carrying a balance can cost you heavily in interest.