5 credit card mistakes you should never make

By Jemma Porter

Consumers should take holding a credit card as a serious responsibility as it is so easy for manageable credit limits to spiral out of control into significant amounts of debt. Credit cards are not the enemy, nor are they bad products; they simply need to be managed effectively in order to achieve goals and avoid debt.

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Nobody is perfect as everyone makes mistakes from time to time, but there are some credit card mistakes you should never make.

1. Applying for too many credit cards
One of the worst credit card mistakes that people make is taking out too many cards. Although you may feel as if you are managing credit cards effectively by having multiple open cards with zero balances, this could actually lead lenders to avoid you.

We are all used to receiving credit card adverts by email or through the door, and "pre-authorised" cards are incredibly tempting. However, before you apply for another credit card, ask yourself whether you actually need it.

Having an emergency credit card is often a good idea as it means you have access to funds should something unexpected occur. The problem starts when you have two or three of these cards. Lenders may see card holders with many unused open credit cards as a risk because one day they could simply give in to temptation and max out every single card.

2. Not reading the terms and conditions
Many credit cards come with balance transfer offers, low interest rates, bonus rewards and much more but these are often for an introductory period only. By not reading the small print in the terms and conditions, consumers are leaving themselves wide open to trouble.

For example, a consumer may sign up to a 0% interest credit card, spend the month splashing out because they don't have to worry about any interest charges. When the bill comes through the door it could be a completely different scenario. Quite often 0% rates only apply to balance transfers, not purchases. This kind of error is all too common with people who choose not to read the terms and conditions of the credit card.

3. Getting seduced by introductory rates
This is somewhat similar to not reading the terms and conditions, but it is such a common credit card mistake that it deserves its own section. Credit card companies use introductory interest rates to lure customers in, but very few people actually consider what the rate may be after this period.

To assume that the credit card would have a reasonable rate of APR after the bonus rate is naïve, and some credit cards could even soar to 20% or 25%. The average rate of interest on UK credit cards is currently around 18%, so don't be surprised when the cost your purchases dramatically increase after six or 12 months.

Many payment methods take a couple of working days to complete, so pay well in advance of the due date to be certain of on-time payment.     

4. Missing or making late payments
Missing payments altogether or making late credit card payments will wreak havoc with your credit rating. Damaging your credit rating due to tardiness or forgetfulness could make it incredibly difficult for you to obtain credit and good interest rates on future loans or credit cards.

Many payment methods take a couple of working days to complete, so pay well in advance of the due date to be certain of on-time payment. If you have any holidays planned, take that into account, because your bank won't be going with you and still expects your payment on time.

5. Only making the minimum payment
If you have established that you really do need another credit card, and you have read everything thoroughly and done everything by the book, there is still one blunder you could make -- making only minimum payments.

Ideally, consumers should use credit cards as a convenience and pay off the full balance at the end of every month. By paying only the minimum payment every month it could take months or even years to pay off relatively small balances.

One great tip for managing credit cards, and on how to avoid debt, is to only use the credit card as an alternative to paying in cash. If you don't have the money in your bank account, don't spend it on your credit card.

See related: 5 common credit score mistakes; 4 wrong ways to pay off credit card debt

Published: 8 December 2011