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4 Credit Card Mistakes You Should Never Make

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Using the credit card in your wallet can pave the way toward some tremendous possibilities — a passport to explore the world with rewards points, a way to help get your small business off the ground and even an opportunity to make a real difference around the globe. However, points don’t carry much value if you’re failing to adhere to the basics of responsible credit card use. As you pay with plastic, make sure you steer clear of these four major mistakes.

1. Taking Out Cash

Taking out cash at an ATM. Image courtesy of Getty Images.
Stick to a debit card for taking out cash at an ATM. Image courtesy of Getty Images.

If you find yourself in a situation where you desperately need some real greenbacks, your credit card most likely offers the ability to withdraw cash at an ATM. This may sound like a nice perk, but cash advances come with serious drawbacks — transaction fees and higher annual percentage rates. For example, let’s say you make a cash advance withdrawal of $500. Your bank charges $10 or 5% of the amount of the withdrawal, whichever is greater. So, before the interest even kicks in, you’re already paying an additional $25. Then, depending on how long it takes you to pay back the advance, you’ll fork over additional money at a high APR of 24.99%. Translation: The cash advance will push you and your wallet behind.

2. Falling Into the Minimum Payment Routine

If you’re regularly paying the minimum amount and carrying a big balance, you’re only letting your debt grow. As that debt amount continues to climb, your credit score will move in the opposite direction. Why? Your debt-to-credit utilization ratio will look less appealing. When your monthly payment date draws near, take a look at your personal finance profile to determine the greatest amount you can contribute. If you can pay the entire bill, you’ll give yourself some debt-free bonus points.

3. Letting Rewards Distract You From Managing Your Debt

Always pay more than the minimum balance when paying down your credit card. Image courtesy of Shutterstock.
Always pay more than the minimum balance when paying down your credit card. Image courtesy of Shutterstock.

At TPG, we know that credit card rewards can deliver some amazing benefits including a first-class ticket to explore the world, free nights at your favorite hotels and cash-back opportunities for everyday spending. However, those benefits aren’t worth anything if you’re burdening yourself with loads of debt. As you watch the total number of reward points tick upward each month, pay attention to a more important number: your balance. If you’re carrying a big balance, you’re only rewarding your bank by paying more interest.

4. Failing to Monitor Your Activity

With mobile banking apps and online banking tools, keeping an eye on your transactions has never been easier, and with credit card fraud on the rise, it’s never been more important. Rather than waiting until the end of the month to review a lengthy list of what you spent, I recommend checking in on your credit card activity on a daily basis. If you don’t recognize a charge, you can alert your bank and put an immediate stop to any malicious attempts to use your card.

Looking for ways to make sure you qualify for the best credit card offers available? Check out “3 Key Considerations for Improving Your Credit Score.”

Featured image courtesy of PhotoAlto/Ale Ventura.

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