Are You Making These Top Credit Card Mistakes?

/ BY / Credit 101

While credit cards are great for a number of things-including establishing credit or occasionally funding unexpected expenses-credit card debt and overuse can quickly spiral out of control, leaving you with hefty interest payments and debt you aren't equipped to handle.

Many financial experts have identified a number of credit card mistakes that can lead you down the path to debt trouble. The top credit card mistakes to be aware of and avoid include:

You have too many credit cards.

If you open your wallet or purse and notice multiple credit cards, including department store cards, major credit cards, and even rewards credit cards, you probably have too many cards. Even if you carry low or no balances on these cards, keeping multiple lines of credit card accounts open can look bad to a lender.

If you have a number of credit cards and carry balances on all of them, you're in more dangerous territory than those who carry no balance. Not only are you spending an unnecessary amount of money on interest, but it also indicates you are relying on credit cards to make purchases you can't really afford.

You make minimum payments only.

Minimum payments are designed to keep a balance on your credit card for as long as possible. As a result, credit card companies collect more money in interest and fees than if you pay more than the minimum. To give you an idea, if you have a credit card with a balance of $1,000 and an 18% interest rate and pay the minimum amount of $25 each month, it will take you over nine years to pay off the balance. In that time, you will also have paid $923 in interest.

If you don't think you can afford to pay more than the minimum amount, keep in mind that it doesn't take a lot to drastically lower your interest and balance. Using the same example above and paying $30 a month instead of $25, it will take you just under four years instead of nine to pay off the balance, and you will pay $396 in interest instead of $923.

This calculator can help you determine how much you're paying on your cards by paying just the minimum each month.

You incur unnecessary fees.

Credit cards make a lot of money through fees-a lot. One study found that the credit card industry as a whole earned a whopping $22.5 billion from penalty fees alone in 2010. The most common penalty fees are over limit fees, late fees, and past due account fees.

You can keep from contributing to the penalty fee bowl by making sure you pay your bill on time each month, never going over the limit of your card, and keeping your account current. If you find that you are continually incurring fees, sit down and assess your money management skills. Set up automatic bill pay to avoid late fees, and avoid using your credit cards to keep from going over the limit. If you are past due, contact the credit card company as soon as possible to set up a payment plan.

You don't shop around for great rates and rewards.

Credit cards battle for your business in a number of ways. Don't make the mistake of getting a credit card that doesn't pay you back in one way or another, either through rewards, cash back, or a low interest rate. For a list of available rewards credit cards, visit

Credit cards can be both helpful and harmful. Being aware of these top credit card mistakes can help you manage your credit responsibly and ensure you are getting the most out of your credit card.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.