New to Using a Credit Card? 5 Traps to Avoid

by Maurie Backman | Published on Sept. 19, 2021

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A young adult pays for a shopping purchase with a credit card.

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Credit card newbies, beware -- these mistakes could come back to haunt you.

Credit cards can be a useful financial tool -- as long as you use them well. If you're new to credit cards, here are a few pitfalls to avoid at all costs.

1. Spending extra to snag sign-up bonuses

Many credit cards offer sign-up bonuses, granting you cash back or reward points for spending a certain amount shortly after opening your account. For example, you may get a new credit card offering $300 cash back for spending $2,000 within three months of setting up your account.

There's nothing wrong with going after a sign-up bonus, but don't make the mistake of overspending to snag one. If you would normally charge $1,500 on a credit card over three months, but push yourself to spend $2,000 to claim your bonus, you won't really gain money. If anything, you might end up in the hole. The only exception is if you have a $500 purchase you already need to make during that time, as opposed to spending $500 on extra items to claim a bonus of only $300.

2. Only making your minimum payments

Credit cards give you the flexibility to pay a minimum portion of your total balance each month and carry the rest of it forward. That may seem like a convenient option, but be careful. If you only pay your minimums month after month, you accrue interest on your remaining balance. The result? You spend more money on the items you charged.

3. Paying your bills without reviewing your statements first

Many people pay their credit card bills each month without actually looking at their statements. Don't skip it -- you never know when your statement might contain an erroneous or fraudulent charge, and if you don't address it, you foot the bill for it. Also, you never know when your statement might contain duplicate charges for the same purchase. Read your statement carefully before paying it.

4. Taking a cash advance

Many credit cards offer cash advances, and if you need money in a pinch, that may seem like a good option. But cash advances can be costly. You usually start accruing interest on a cash advance immediately, and you'll likely be hit with a fee to access that money. You're better off finding other ways to access money when you need it. You might, for example, look at taking out a personal loan instead.

5. Not paying attention to the end of your introductory APR period

Some credit cards come with a 0% introductory APR period when you won't be charged interest on your purchases. It can be tempting to take advantage of that leeway. But those intro periods don't last forever, and your interest rate could skyrocket when your intro period ends. Make sure you fully understand the terms of your 0% introductory period before you take advantage of it.

Credit cards are convenient, and in many cases, they reward you for the purchases you were already planning to make. Just avoid these dangerous traps along the way.

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