Key takeaways

  • Accruing too much credit card debt is one of the biggest financial regrets consumers have today.
  • Frequent mistakes made by credit card users include not paying credit card bills on time or in full monthly, accumulating too much credit card debt, applying for and using the wrong credit cards, exceeding their card limit and opening or closing too many cards within a short window.
  • Following best practices like reading the fine print, understanding your rate and terms and not overcharging can help you avoid credit card regrets.

Plastic in your pocket makes the world a lot simpler, especially when you need to purchase something. But with Financial Awareness Day upon us, it’s important to remember that credit cards can easily be overused, abused, mishandled and mismanaged if you aren’t careful. In fact, there are several common regrets consumers report experiencing when it comes to using their credit cards.

Learn more about the most common credit card mistakes you can make, including accumulating too much debt, not paying credit card bills on time or in full, choosing or using the wrong cards, being lax about card security and more.

It’s easy and common to make credit card mistakes

Here’s a Financial Awareness Day reality check: 74 percent of U.S. adults indicate they have a financial regret, including not beginning to save for retirement early enough (the top regret, at 21 percent) and taking on too much credit card debt (15 percent), per a recent Bankrate report.

That last stat is important because getting in over your head with credit card bills can make it challenging to navigate money matters and accomplish your financial goals.

“Issues with credit cards are very common, especially among younger and less informed consumers,” says Sean Salter, associate professor of finance at Middle Tennessee State University in Murfreesboro, Tennessee. “For younger consumers, many are tempted to elevate their lifestyle by using credit cards to make purchases that their income can’t support. Even older, more experienced consumers can fall into that trap. Credit cards are a financial tool, but it’s very difficult to maintain the discipline necessary to use them to your advantage.”

Tim Doman, CEO of Top Mobile Banks, agrees. “We are tempted by the reward points, cashback offers and sheer convenience of credit cards. However, the very thing that makes them attractive — easy access to credit — can be a double-edged sword,” cautions Doman. “It’s kind of like giving someone a sports car for their first driving lesson: Speed is thrilling, but can lead to accidents if you are not careful.”

Case in point: Credit card debt among Americans across the country recently surpassed a record $1 trillion, according to the Federal Reserve Bank of New York.

Avoid these common credit card mistakes

Curious what the most common pitfalls are for credit card users? Steer clear of these worst practices, the experts advise.

Mistake #1: Taking on too much credit card debt

Using credit cards as free money for purchases beyond your means can result in unaffordable bills, increased interest rates, excess fees and damage to your credit score.

“To build credit and use your card responsibly, only make manageable purchases and have a budget or payment plan in place,” says Geri Hopkins, chief operating officer for Skyla Credit Union in Charlotte, North Carolina. “If you are already in credit card debt, you should use your card only in an emergency situation, create a budget that includes paying off your balance and consider a balance transfer – particularly onto a card that offers an extended period with 0 percent APR and no balance transfer fee so that you can consolidate and repay your debt more quickly.”

Mistake #2: Not paying your balance in full every month

Not paying your credit card balance in full every month is a budgeting problem that lots of Americans suffer from.

“The big issue here is that if you carry a balance, you transfer power to the credit card company. The carryover balance allows the company to charge interest on that balance — an interest rate that can be extremely high,” warns Salter. “To sidestep this mistake, your household budget should be the primary source of decision-making regarding how much money should be spent. If your budget won’t allow repayment within one month, the purchase should be avoided.”

Mistake #3: Not paying credit card bills on time

Among the biggest traps consumers fall into is not paying what they owe punctually — meaning by the deadline indicated on your credit card statement.

“Paying late has a significant and costly impact on your credit score. You will still be responsible for the past due payment, current payment and any late fees assessed at the next due date,” says Renée Jones, vice president of Consumer Products for Georgia’s Own Credit Union. She recommends using card alerts, setting up bill-due reminders on your phone or PC and scheduling automatic payments on your card, which will ensure that at least your minimum payment due is paid before the due date.

Note that missed or late payments, even by as little as 30 days, can drop your credit score by 60 points, leading to increased fees and higher interest rates on loans/credit, per Hopkins.

Mistake #4: Choosing the wrong credit card

When you’re shopping around for a credit card to apply for, think carefully about different criteria, including the interest rate on the card, rewards offered and annual fees assessed.

“Don’t pick a card that looks the coolest or has your favorite department store on it. You should only be selecting cards that pay you some sort of reward — either cash back, travel points or store discounts,” suggests Skylar Riddle, financial advisor for Fort Pitt Capital Group. “The card should also not have an annual fee, if possible. And be sure to check the APR and compare it to other cards you can apply for instead.”

Mistake #5: Being lax with card security

Credit cards and the numbers printed on them can be easily stolen and used to fraudulently purchase goods and services. That’s why it’s crucial to follow best practices for safeguarding your card.

“Most people think the card will dispute any fraudulent transaction made on your behalf. That is not entirely true — you could face certain consequences by being lax,” Riddle notes. “If charges are small enough and you don’t pay attention, they could slip past you undetected. It could also be a gateway to more of your financial data. That’s why you should always monitor every purchase and card statement carefully.”

Contact your credit card company immediately if your card is compromised, lost or stolen. Hopkins adds that the credit card company should offer protective services, such as alerts and fraud detection without asking for sensitive information like your PIN, login info or Social Security number.

Mistake #6: Using the wrong card for certain purchases

Be mindful of which card you pull out of your wallet to pay for that purchase. Are you missing out on earning a higher cash back or airline miles reward because you picked the wrong card for that transaction? Are you planning on only paying the minimum due at the next deadline because income is tight, but the card you choose to use has the highest APR among all those in your wallet?

“Make sure to think through your purchases and determine which card will earn you the most perks and assess the lowest interest rate for that purchase,” explains Hopkins.

Mistake #7: Opening or closing too many credit cards

Follow the Goldilocks rule when it comes to credit cards: Not too many or too little — just the right amount. In other words, don’t try to apply for or open too many cards, especially in a short period, and think twice about closing or canceling old cards.

“Opening too many credit cards can lead to multiple hard inquiries on your credit report, temporarily lowering your credit score. You should aim for no more than two to four inquiries annually across all loan types,” Hopkins continues. “Also, keeping unused credit cards open is advisable. This maintains a longer credit history and increases available credit — two factors that influence your credit score. Just always be sure to use your old cards periodically to keep them active, regardless of the transaction amount, and monitor them for potential fraud.”

Mistake #8: Exceeding your credit card limit

Your credit card has a ceiling (maximum spending limit) in place. Know what this max is and respect it, the pros concur.

“If you go beyond your credit card limit, this can violate your credit card agreement and result in additional fees and penalties. It could also result in the lender freezing or canceling your credit card account, so avoid this at all costs,” says Hopkins. “If you want to increase your limit, request it from your credit card company. You’ll more likely receive an offer to increase your credit card limit automatically when you have demonstrated responsible card usage for a long time — meaning you’ve consistently made on-time payments or pay off your credit card balance in full regularly.”

Other mistakes

Here are a few other no-nos that you want to steer clear of:

  • Feeling pressure to constantly use your card. Before reaching for your card to make a purchase, consider using cash, especially if you have difficulty paying your bills on time.
  • Not looking closely at 0 percent APR offers. Missing payments or not meeting the minimum payment amount can void your zero percent interest offer, which means the card will revert to a higher interest rate. Also, keep in mind that the promotional zero percent APR rate offer will eventually run out and you will begin accruing interest on purchases, so aim to pay off your balance before the rate resets.
  • Not reading the fine print. “Make sure you understand how your cards work, what the payment cycles are, what rewards or benefits you can get and how the company will charge you fees or interest if you carry a balance,” advises Salter.

The bottom line

Credit cards can be handy financial tools, but they can be easily mishandled by users if they’re not careful.

“Just as a hammer can build or destroy, so can a credit card — depending on how it is used,” Doman says. “Embrace them, but with knowledge and caution.”

Get in the habit of taking advisable steps to use credit cards wisely. Understand the card’s rates, terms and fees thoroughly. Set and follow a budget that will ensure you repay your debts on time, not just on Financial Awareness Day, but year-round as well.