6 Credit Card Habits That Cost You Money

Avoid these credit card moves.

Credit cards are a commonly used personal finance tool. But it takes practice to learn how to use them well. Some habits could cost you money, and if you're not careful, some habits can also harm your credit score and put you in a difficult financial situation. Keep reading to learn which credit card habits to avoid so you can set yourself up for success.

1. Paying only the minimum amount due

When using a credit card, the best practice is to pay your entire credit card bill in full. However, your card issuer will list a minimum amount due on your bill. If you only pay this amount, you'll be charged interest on the unpaid portion of your balance. You'll also put yourself at risk for carrying credit card debt. You can avoid these extra costs by paying your entire balance off every month.

2. Making late payments

Paying your credit card bill on time each month is a good move to make. Your card issuer will charge you fees when you make late payments. These extra costs can add up. Additionally, missed or late payments can harm your credit report. Once you're 30 days or more past due on a bill payment, it can be reported to the credit bureaus.

Paying your bills on time can help you avoid extra fees. Plus, it's a good move for your credit score. If you struggle to pay your bills on time, you may want to consider setting up autopay through your card issuer. This way, you won't forget and fall behind on payments.

3. Not monitoring your credit card usage

Using your credit card to pay for purchases you can't afford is a recipe for disaster. Instead, you should carefully monitor your spending and only buy what you can pay off. When you don't monitor your credit card usage, it can put you in a tough financial position. You'll be charged credit card interest charges on unpaid debt and your balance may continue to climb. If you struggle at monitoring your spending, budgeting apps can help you stay on track.

4. Paying an annual fee for a card you don't use often

While no annual fee credit cards exist, some cards come with a yearly fee. For some consumers, the fees are worth it because they use their cards often and take advantage of the benefits offered. But if you're paying an annual fee for a card that you hardly use or for a card with benefits that you're not utilizing, you're wasting money. If this is the case, consider downgrading your card to a card with no annual fee.

5. Taking out cash advances

If you ever need cash, it's best to use your debit card to take money out of your bank account. When you use a credit card to take out cash, it's considered a cash advance, and your card issuer will charge credit card cash advance fees. Typically these fees range from 3% to 5%.

Additionally, you'll also be charged interest on the cash advance, and interest is charged right away. All of these fees add up and impact your finances. Don't be tempted to use a credit card to take out cash if you don't like to waste money on extra fees.

6. Using the wrong rewards credit card

Reward credit cards offer an easy way to earn rewards, like cash back on spending. Using the right card can maximize your reward potential. For example, if you have a dining credit card that earns 4% cash back on restaurant purchases, if you use a 2% cash back to pay for dinner out instead, you're missing out on credit card rewards. Paying with the dining card will double your rewards earned.

Using the wrong rewards card costs you money because it will take longer to reach your redemption goals. If you use rewards credit cards, ensure you understand which cards to use for various purchases, so you don't miss out on rewards.

All of these credit card habits can get expensive. You can keep more money in your checking account by making careful credit card moves. The more comfortable you get using credit cards regularly, the easier it will be to make choices that benefit your wallet and your credit.