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How to avoid 7 of the most common credit card mistakes

four hands holding credit cards avoiding making common credit card mistakes

Credit cards: one of the most useful tools in your wallet, but also one that can get you in the most trouble if you aren’t careful. 

A lot of wariness around credit cards is really to do with a lack of confidence and education. Learning the ins and outs of credit cards - and most importantly, learning which mistakes you can avoid - can help you get the most out of a credit card (instead of avoiding them altogether). 

We’ve rounded up seven of the most common mistakes people make with credit cards - and how you can avoid making them!

blue alarm clock to avoid making late credit card repayments

Being late on your repayments

Mistake #1: Your repayments are due on the 20th of the month. It’s the 25th and you’ve completely forgotten! 

A late payment may not seem like the end of the world, but it can do some real damage. Not only are there late fees to consider, but keep at it for too long and it could seriously impact your credit score. This can make it much harder to apply for loans or credit cards in the future, though thankfully this damage isn’t irreversible

Fix: You can set up automatic repayments to cover the minimum payment on your credit card bill each month to avoid this - just make sure that there’s always enough money in your bank account to cover it.

Making only the minimum repayment 

Mistake #2: Your credit card statement says the minimum repayment is a certain amount, so that’s all you’re going to pay. Ever.

In reality, paying the minimum will help you steer clear of late fees, but you’ll start paying interest on anything you still owe. If you don’t pay off your whole balance, you’ll also lose your precious interest free days for the next month, which means this can very quickly snowball out of control. Interest can stack up!

Fix: Ideally, make sure you’re never spending more in a month than you can comfortably afford to repay. When you set up automatic payments, think about setting them up to cover your whole credit card bill, not just the minimum.

maxing out credit cards by overspending

Maxing out your credit card

Mistake #3: You’ve got a $10,000 credit limit and you’re planning on using it - every last cent of it! 

Not only does maxing out a credit card mean that you’re probably spending at a rate you can’t afford to pay off, but it will also put you at risk of overdraft fees. You don’t want to head over your credit limit, as it can negatively impact your credit score, and make you seem like a risky spender. Talk about a major red flag for future financial providers!

Fix: The key here is to use the credit available to you in a responsible way. Work out what 30% of your credit limit is, and try to keep spending capped there.

Waiting to report a missing credit card

Mistake #4: You can’t find your card! Maybe it fell out of your wallet on the train, but maybe you just left it at home. You’ll worry about it tonight. Or tomorrow! Definitely by the end of the week.

Most credit cards have pretty tight security measures in place to protect you against fraud, and to make sure no one uses a lost or stolen card to spend all of your money. Even within these security guidelines, you have a responsibility to minimise the potential damage, which means letting your credit card provider know ASAP. If you don’t, a card provider can hold you responsible for transactions you didn’t make - that means footing the bill.

Fix: Think someone has swiped your card? Call up the bank! Most banking apps also have the function to report a lost or stolen card, so there’s no excuse to let this one slide.

Ignoring interest free days

Mistake #5: Interest free days are just a marketing gimmick, right? What does that even mean? I’m just going to make my big purchases when I need to.

Some credit card users don’t fully understand how to make use of interest free days - which can be a big missed opportunity, since they’re one of the best ways to save money when using your credit card. Since you lose these for the next month if you have an outstanding balance owing, some cardholders might never actually be using their interest free days.

Fix: Every month you’ll have around 44 or 55 days in which to pay off your spending before being hit with interest. Remember, this period begins at the beginning of your bill cycle and not when you make a purchase. Making your big splurges is best saved for the beginning of your interest free days, when you have the maximum amount of time to pay them off.

hand holding shopping bag of australian hundred dollar notes having withdrawn cash at ATM

Relying on cash advances

Mistake #6: Your favourite restaurant is cash only, but you don’t have any on hand. You hit up the ATM and withdraw cash from your credit card. Why not, right?

Even though it feels like we get closer to a cashless society every day, sometimes you just need cash. Resist the urge to withdraw cash from your credit card, though, because the fees are something to behold! Your credit card will have a cash advance rate, higher than the normal interest rate, charged on any cash you take out. No interest free days on this money either - you’ll be paying interest right from the get-go.

Fix: If you need to withdraw money, use your debit card or go for cardless cash. That way, it’s money directly from your account, and the only fees to watch out for are ATM fees!

Swearing off credit cards completely

Mistake #7: Having a credit card just seems too tricky - why would I bother?

Even though credit cards can seem a little daunting, they can be your first step to building up a good credit history. That means you’ll be better set up when it comes time to apply for a car loan or a home loan later on, because you’ve established yourself as low-risk and able to manage debt. It can also be a good way to manage your budget, because a credit card statement can help to track your spending while giving you access to money between your pay checks. 

Fix: Rather than avoid credit cards altogether, make sure you choose the best credit card for your needs, and then brush up on how to use it responsibly. Just keep in mind these six other mistakes, do your research, and you should be ready to go!

If you’re in the market for a credit card that suits you, take a look at Mozo’s best credit cards. Stay informed and learn more about the different kinds of credit cards.

Sara Borman
Sara Borman
Money writer

Using her Bachelor of Communications in Writing, Sara has spent her professional career creating content and crafting copy. Her writing has been published in academic journals and literary anthologies in the US and Australia. She’s determined to make the world of finance accessible and loves finding a way to make money interesting to the everyday person.

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