3 Things to Never Do With Your Credit Card

Credit cards are a popular way to pay for purchases. In the United States, 80% of consumers have at least one credit card, according to a study by The Motley Fool Ascent. But not everyone has the same experience with their credit card.

When it comes to credit cards, whether they help or hurt you financially depends on how you use them. If you manage your credit card well, it's a secure payment method that can also get you some additional benefits, such as rewards and purchase protections. If you don't, you could become one of the people with credit card horror stories.

Nobody wants that. When you know what not to do with your credit card, you shouldn't have any issues. Here are the things to avoid.

1. Not making your payments

Each month, you'll receive a credit card statement with a minimum payment requirement. As long as you pay at least that much by the due date, everything will be fine with your account. If you don't make your payment, it can lead to serious problems. Here's what you can expect:

• The credit card company will charge you a late fee when you miss your payment.
• Once your payment is at least 30 days late, it can be reported on your credit history. This can cause your credit score to drop, in some cases by over 100 points.
• If you don't get caught up, you'll get charged more and more interest. Eventually, the credit card company may send your account to collections.

To avoid giving you the wrong idea, if you accidentally miss a payment, it's not the end of the world. You'll be charged a fee, but many credit card companies will waive your first late fee if you call and ask. And a late payment needs to be at least 30 days past due to affect your credit score. If you get caught up before then, it won't affect your credit.

Still, you don't want to get into the habit of paying late, or going a long time without making your payment. It's best to always pay on time to avoid late fees and other issues.

It's also wise to get into the habit of paying your credit card bill in full. You only need to make minimum payments to stay current, but if you pay off your entire statement balance every month, you won't get charged interest.

2. Getting a cash advance

You can get cash with a credit card, but there are some serious drawbacks. This is called a cash advance, which normally involves setting up a PIN for your card and using it in an ATM, just like a debit card. Some credit card companies also offer convenience checks. These let you write a check against your credit card account.

Regardless of the method, a cash advance is a bad idea, for a few reasons:

• Credit cards charge a cash advance fee, with the standard amount being 3% to 5%.
• Interest charges on cash advances start immediately. There isn't any grace period like there is with purchases.
• Many credit cards charge a higher interest rate on cash advances than on purchases.

So, you get charged an extra 3% to 5% on a cash advance, it will probably have a higher interest rate, and you'll start getting charged interest right away. That all makes it a costly way to use your credit card.

Tip: Watch out for any transactions that involve sending money, such as money wires and even transferring funds through payment apps. These can be considered cash advances if you pay for them with your credit card. To play it safe, stick to a debit card for these types of transactions.

3. Spending more than you can afford to pay back

One of the most common ways people get burned with credit cards is overspending. When you can spend money and pay it back later, it's easy to convince yourself to make purchases you normally wouldn't.

Make sure you have a plan to pay back every purchase you make on your credit card. The safest approach is to treat it like you're using a debit card. Only make purchases you could afford with the money in your bank account, and pay them off in full by the time your payment is due.

If you're thinking of making a big purchase that you won't be able to pay off right away, look into 0% APR credit cards. These have a 0% APR for an intro period, so you can make purchases and pay them off over time, interest-free.

Once again, if you go this route, make sure to have a plan for how you'll pay that purchase off. For example, let's say you get a card with a 0% intro APR on purchases for 15 months. You need to cover a $2,000 emergency home repair. Before you go through with that, decide how much you'll pay, such as $200 per month, to get that purchase paid off within a reasonable time frame.

To sum it up, the main things to watch out for with credit cards are not making your payment, getting cash advances, and spending more than you can afford. If you don't do any of them, you'll likely have a positive experience with your cards.