Costly Habits to Avoid

/ BY / Managing Debt

Credit cards can be helpful tools for building credit, earning rewards, or helping you out of a financial emergency. But if you're not careful, it's easy to fall into habits that can cost you a lot of money. 

Here are some of the worst—and most expensive—credit card habits you should avoid:

Carrying a balance 

Have you ever noticed that no matter how long you’ve been paying your credit card bill, the balance never seems to budge? That’s because your payment is being divided between interest and the principal, or the balance on the card. When you regularly carry a balance, especially at a high interest rate, the majority of your payment goes towards interest. The rest is put towards the principal, so you spend years chipping away at the balance.

Most financial experts recommend paying off the balance each month. If you use your credit card for rewards, make sure you stick to your budget so you have the money at the end of the month to pay it off.

Paying only the minimum payment

Minimum payments are designed to keep you in debt for as long as possible. The longer you carry a balance on your card, the more money you spend on interest in the long run. For example, let's say you put a new $800 TV on a credit card with 18% interest. If you pay just the minimum payment each month, it will take you seven and a half years to pay it off. During that time, you'll have paid $623 in interest--almost as much as the cost of the TV. 

If you carry a balance or you're trying to pay off your cards, pay more than the minimum amount each month. Even just a few more dollars a month can result in big savings. Using our example above, paying just $5 more a month would pay the balance off almost 4 years faster and save $325 in interest. 

Making late payments 

Most credit cards charge a fee if your payment is even a day late. These fees run anywhere between $25 and $35 and are an expensive mistake, especially if you get in the habit of paying past the due date. 

Late payments are not only harmful to your wallet, but to your credit score as well. Once your payment is more than 30 days past due, it shows up on your credit report. Even one late payment can lower your score by as much as 50 points, and it remains on your report for the next seven years. 

Lower your chance of making late payments by setting up automatic bill pay on your card or setting up alerts on your phone to remind you when your bill is due. If you pay your bill online, pay special attention to when the payment is considered late. Most credit card websites require you to make your payment by a certain time of the day, which may also be on a different time zone. 

Making purchases you can't otherwise afford 

A new credit card or a high credit limit can give you the false impression that you have money to spend. Making purchases that you can't afford to pay off at the end of the month is a costly habit. It can also snowball into more serious problems, like maxed out credit cards and monthly payments that eat away at your monthly budget.

Avoid this by removing the temptation altogether. Don’t keep your credit card in your purse or wallet, and delete your card’s saved information from your favorite shopping sites.

Avoiding these costly credit card habits means more money in your wallet and better control of your finances.

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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.