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3 ways credit card beginners can avoid biting off more than they can chew

Dec. 28, 2019
9 min read
3 ways credit card beginners can avoid biting off more than they can chew

Update: Some offers mentioned below are no longer available. View the current offers here.

Editor’s note: This post was originally published on June 19, 2018. The offers and benefits mentioned below are subject to change at anytime, and may no longer be available.

The biggest mistake points and miles beginners make is trying to do too much, too fast. Being approved for a credit card, redeeming your cash back or seeing those points and miles build up in your account is an intoxicating feeling. The world of points and miles is your oyster, and it’s natural to want to squeeze every ounce of rewards out of the system.

But in order to get the most from your new cards and the rewards they bring, it’s important to know how to navigate the twists and turns that exist for new cardholders. There are damaging credit card mistakes you can make if you get in over your head. Here’s how to make sure you don’t bite off more than you can chew.

Don't Hurt Your Credit Score

Even if your credit score is high, errors on your report may still be impacting it. Image courtesy of scyther5 via Getty Images.
Your credit score is your lifeline to travel rewards. (Photo by scyther5 / Getty Images)

If you ever want to graduate to bigger and better rewards cards, you’ll need a solid credit score. Don’t slow your progress by (unintentionally) hurting your score in the following ways.

Not paying your bill on time

This is commandment number one for credit cards. If you’re not paying your bill on time, you could hurt your credit score significantly. To make matters worse, late payments might lead to other issues like extra fees and no cash back or points for your purchases. Even if you do still earn rewards, the benefit is almost always nullified by late fees and having to pay interest. Paying your bill on time is a must.

Related: Ten Commandments for travel rewards credit cards

Using too much credit

Overutilizing your credit card limits is a common credit mistake that many people make. You may work hard to keep your credit card payments on time (and kudos if you do), but a high balance-to-limit ratio could still lead to a lower credit score.

A large chunk of your score depends on how much of your credit card limit you’re using from statement to statement. This is also known as your credit utilization ratio. If you have a $1,000 line of credit on a credit card and your statement closes with you owing $900, the card has a 90% credit utilization ratio. When your utilization ratio gets too high, your score could drop.

If you find yourself inching close to your credit limits on a regular basis, try paying off your credit card balances a few days before your billing period ends (i.e., before the statement closing date). Follow this strategy to make sure a lower utilization rate is reported to the credit bureaus each month.

You should aim to never exceed 30% utilization on your credit report. Yet lower credit card utilization rates are even better. Low utilization is typically good for your credit score and shows that you’re using credit responsibly. Credit bureaus only see your outstanding balance at the time your card issuer reports it (usually shortly after your statement closes). So, as long as your balance-to-limit ratio is low enough at that point, you should be in the clear.

Also, do not close unused cards, especially those that have no annual fee. Doing so can actually hurt your credit score. The loss of the unused credit line can drive up your utilization ratio even if you just spend the same amount of money you usually do.

Applying for too many new cards

Once you start to see your rewards rolling in, it’s easy to want more. But applying for too much new credit within a 12-month period can hurt your credit score, even if you aren’t approved.

Each time you apply for a new card, a hard inquiry (sometimes known as a “hard pull”) gets added to your credit report. When enough hard inquiries appear on your credit report at once, it could hurt your credit score.

Thankfully, even though inquiries could count against you, they’re among the least influential factors that make up your credit score. The effect of these hard inquiries on your score lasts a maximum of 12 months with FICO and as little as 90 days with VantageScore. Inquiries also drop off your credit report entirely after two years.

Still, it’s important not to apply for new credit carelessly. You don’t want to apply for accounts you’re not ready to open. The process of building your credit takes time. For example, it might feel great to have a The Platinum Card® from American Express as the second card you’ve ever had. Yet you’re not likely to be approved if you have a thin credit history or lower credit score. When you do apply for a new card, do your research and make sure it’s one you’re likely to be approved for first.

Maximize Your Rewards

Using new credit cards responsibly is only half the battle. Often times people forget that not all rewards cards are created equal. When you have even just two credit card accounts, it’s important to know exactly when to use each card.

Avoid the following mistakes when it comes to earning points and miles.

Missing out on sign-up bonuses

Cards such as the American Express® Gold Card and The Platinum Card® from American Express both feature welcome bonuses that are very attainable — if you time your spending correctly. If a card comes with a welcome offer of 100,000 Membership Rewards® Points after you spend $6,000 on purchases in your first 6 months of card membership, such as the Amex Platinum, make sure you’re in a position to hit that goal before you apply.

If you know you have a large purchase coming up, it could be the perfect opportunity to earn a welcome bonus. What you don’t want to do is miss out on a huge bonus because, for example, you bought a new phone the week before you got your new card instead of timing your spending better. Know your spending habits and time your card applications accordingly.

Treating all your cards the same

Wallet with cash and credit cards. (Photo by Getty Images)
(Photo by Getty Images)

Credit card rewards and bonus spending categories can vary widely from one card to the next. Some cards have complicated rewards structures that earn valuable bonus points on certain purchases but offer poor rewards on others.

Reading The Points Guy on a regular basis can you keep track of this type of information. It’s also good to have a working knowledge of which cards are offer which benefits. For example, if you carry the Amex Gold Card that offers 4x rewards on dining worldwide and U.S. supermarkets (and you don’t carry another card that can beat those earnings), you may want to train yourself to use the Amex Gold when you purchase food. And of course, don’t use your debit card unless there’s no other alternative.

Control Your Appetite

(Photo courtesy of Getty Images)
(Photo courtesy of Getty Images)

Rewards are always exciting. Seeing your mileage balance increase after a trip or redeeming credit card points at the end of the month reminds us why we spend hours and days researching cards. It’s why we read stories about the amazing things people can experience with points and miles. But Rome wasn’t built in a day, and your rewards account won’t be either. Be careful not to find yourself in either of the following two traps.


Never fall into the mindset of thinking that the rewards you earn will make up for spending extra money you don’t have. This line of thought can lead you into dangerous territory. When you overspend to chase rewards, you risk putting yourself in a position where you’re unable to pay off your bill or, worse, keep up with your payments at all.

Always use credit cards responsibly, no matter how tempting a reward seems. You should only buy exactly what you would have bought with cash or a debit card — nothing more. As much as they can bring you up, points and miles can also be a downfall if you manage your accounts the wrong way. Don’t make this mistake.

Chasing airline status

Complimentary upgrades to first class sound enticing. Yet if you’re a points-and-miles beginner who’s thinking about chasing airline status, you probably won’t use the benefits nearly enough to make it worth it.

Some people can incur hundreds or even thousands of dollars in unnecessary expenses while chasing airline status that will barely benefit them. If you’re just starting out in the world of travel credit cards, let the rewards come to you as you naturally go about spending and traveling.

Bottom line

Effectively navigating the world of credit cards rewards can have an undeniably positive impact on your life. From giving you extra money in the form of cash back to helping you book (almost) free trips in the form of points and miles, the benefits can be endless.

Remember that as a beginner, no one expects you to have massive rewards balances right away — and you especially shouldn’t expect that of yourself. Building an arsenal of great cards and lots of rewards takes time. But if you follow the rules and avoid taking on too much at the start, you’ll graduate from being a beginner in no time.