3 Credit Card Mistakes to Leave Behind in the New Year

There's a lot to love about credit cards if you use them wisely. You can get rewarded just for buying stuff you'd need to purchase anyway, and you can build credit by using your card responsibly so other more expensive loans (like a mortgage) will cost less.

Unfortunately, not everyone uses their cards in a way that helps them. There are some common credit card mistakes that could cost you -- and that you should leave behind forever by making a few simple changes. Here are the errors you'll want to say goodbye to for good, along with some tips to make sure you never make those mistakes again.

1. Missing payments

Missing payments is one of the worst credit card mistakes you can make.

Your lender charges you a late fee, which could be as high as $30 for a first late payment and $41 for any additional late payments within six billing cycles. But you could also see your credit score fall by as much as 110 points if you previously had great credit, or by 60 to 80 points if your credit was only OK to begin with.

To make certain you never make the mistake of paying late, choose automatic payments. You can sign into your credit card account online and request to have at least the minimum -- and ideally the entire balance -- paid on its own every month. This will eliminate the possibility of forgetting to send in your payment.

2. Maxing out your card

You have a credit limit on your credit cards. If you come close to or hit that limit, this is called maxing out your credit cards.

Maxing out your cards could result in around a 50-point drop in your credit score. Of course, when your card is maxed out, you also can't use it anymore -- which means you can't earn any rewards and you won't have credit available if you really need it.

You should aim to use 30% or less of your available credit on a regular basis to help your credit score. But even if you have to charge more than that, be absolutely sure you don't get close to -- or go over -- your card's limits.

Keep tabs on how much you're charging by signing into your account regularly and, when possible, ask your card issuer for a credit line increase. Often, you can do this without a hard credit check, especially if you've been a good customer for a while.

If you increase your credit limit, your credit utilization ratio (credit used versus credit available) is easier to keep below that 30% threshold necessary for the best credit score. Say, for example, you had a $1,000 balance and a $2,000 limit. You'd have a 50% card utilization ratio which could hurt your score.

But if you asked your card issuer for a credit line increase and the issuer doubled your available credit to $4,000, you'd have only a 25% utilization ratio -- which is a lot better for your credit score.

3. Paying interest at a high rate

The average credit card interest rate is 21.19% as of August 2023, according to the Federal Reserve Bank of St. Louis. If you are carrying a balance on your cards (which means you still owe money after making your monthly payment), you'll have to pay interest on your debt.

If you're worried about potentially not being able to pay your bill in full at any time, shop around for credit cards offering a 0% APR on purchases for the first 12 months (or longer). This will give you time to pay down your debt without owing a huge amount of financing charges.

Your best option, though, is to never charge more in a billing cycle than you can pay back in full before you get stuck paying interest. If you truly need to borrow money and a 0% APR offer won't work for you, look into other options that could be cheaper first, like a ​personal loan.

By avoiding these three mistakes, you can use cards in a smart way to build credit, earn rewards, and positively impact your personal finances -- rather than ending up with costly financing charges or a hit to your credit score instead.