The 3 most common credit card mistakes


There's no doubt that credit cards can help you manage your money -- as long as you use them wisely.


For example, credit cards with a promotional 0% APR can help you buy large items ‘interest free' for a certain period of time; but you have to pay off your balance before the promotional period expires. Otherwise, you could wind up paying a significant amount of interest. Similarly, balance transfer credit cards can help you reduce the interest you pay on your borrowings; but they can also carry hefty fees.

It is easy to make errors with your credit cards if you aren't careful. Here are three of the most common card mistakes that you should never make.

1.  Exceeding your credit limit or paying late
Making a late payment or exceeding the limit on your credit cards can be costly. You may incur high penalty fees from your card provider, and you may also damage your credit rating. If you miss too many payments, you could also wind up with a poor credit score and only be eligible for bad credit credit cards.

Tip: Check your statements carefully to determine what payments are due and make sure that you are not reaching the limit on your credit cards.

2. Making just the minimum payment on your credit cards
Paying only the minimum amount due on your credit card bills is one of the worst mistakes you can make. The minimum payment identified on your credit card statement details the amount the credit card company insist you must pay, not the amount you should pay.

Tip: Paying the minimum payments on your credit cards every month means that it will take years for you to clear your balances. Instead, try and pay as much as you can to your cards every month. That way, you will save money on interest and pay off your credit card debt faster. 

3.  Selecting the wrong credit card for your needs
A common mistake is to apply for a credit card that doesn't fit your needs. For example, if you want to spread the cost of a large purchase over several months, you may want to look for a 0% APR credit card. Similarly, if you want to reduce your interest payments on your borrowing, a balance transfer card may suit your needs.

Tip: When comparing the best card rates, make sure you apply for a card that does what you need it to do. Don't just look for the lowest rate or the best reward. 

See related: Cardholders advised to plan for a rise in interest rates; Avoid these mistakes to keep your credit clean

Published: 31 March 2011