3 Credit Card Mistakes to Avoid During a Recession

Do your best to avoid these if economic conditions sour.

A 2023 recession is definitely not a sure thing. But many experts are convinced we're heading for one because the Federal Reserve is not backing down on its interest rate policies. 

The Federal Reserve has been aggressively raising interest rates in an attempt to slow the pace of inflation. By making it more expensive for consumers to borrow, the goal is to encourage a slowdown in spending that can bridge the gap between supply and demand that's been causing inflation to surge. 

The concern, though, is that consumer spending might decline to a major degree if the cost to take out a loan or carry a credit card balance becomes prohibitively expensive. And so it's easy to see why so many recession fears continue to abound. 

Since it's possible we'll soon be faced with a recession, it's important to know how to best manage your credit card usage and applications during such a time. Here are three critical mistakes you'll want to avoid if economic conditions take a turn for the worse. 

1. Not paying on time

Falling behind on your credit card payments could cause a huge hit to your credit score. And during a recession, that's a dangerous thing.

Let's say economic conditions worsen and you lose your job at a time when companies are lowering their headcounts left and right. At that point, you might have to take out a loan to stay afloat. But if you wreck your credit score by being late with your credit card bills, you might take that option off the table.

2. Applying for too many cards at once

Just as being late with credit card payments could damage your credit score, so too could applying for too many cards within a short period of time. If you're worried about a recession and want to increase your spending limit in case you lose your job and need that leeway, apply for one new credit card now, and then, ideally, wait six months to apply for your next one.

3. Assuming you'll fall back on your credit cards if you lose your job

If a recession strikes, you may find that you have no choice but to fall back on your credit cards to pay your bills. But that's not an ideal solution. A better bet is really to have some money in savings you can tap in an emergency.

If you don't have an emergency fund right now, try cutting your near-term spending to build some cash reserves. You can also try boosting your savings by getting a second job. Even a small emergency fund could help you avoid credit card debt if the economy takes a dive next year -- or at least help you keep your credit card debt to a minimum. 

We can't say with certainty that a recession is coming. But it's important to brace for that possibility. It's also a good idea to come up with some credit card strategies so you don't make your financial situation harder on yourself during an already difficult time.