Credit Card Mistakes

5 Common Credit Card Mistakes to Avoid Making in 2021

Nowadays, credit cards are becoming more widely used as applications become more accessible and online shopping continues to rise. Based on data from The World Bank during the last decade, The Global Economy reports that around a fourth of people globally now use credit cards. In Canada, 83% aged 15 and up own a credit card. Other major territories like Japan and the U.S. hit just below the 70% mark, while Australia boasted 59.59%. Even with those numbers, not a lot of people know the ins and outs of good credit card ownership. If you’re thinking of applying for your first card or already own a couple, make sure you read up on the most common credit card mistakes that you need to avoid.

Not Paying Off All Your Balance

Credit Card Mistakes


There is a common misconception that it’s actually good to retain a balance and carry it over month-to-month. The idea is that this supposedly helps you build your credit faster. This common myth actually ends up increasing the interest payments that the credit card owner has to make.

It’s also important to remember that when you carry a balance over, your utilization rate is affected. Essentially, doing this for a long period of time will really hurt your credit score.

Only Paying the Minimum Every Month

Many people believe that, as there is a minimum, it’s alright to just pay it every month. However, there are some caveats that actually make it the more expensive option.

If you consistently pay just the minimum, your interest will make your monthly dues pricier as time passes. This is most apparent when you see the interest you will have to pay off at the end of the year.

Here’s a sample breakdown by CNBC: Let’s say the average household credit card debt is $6,081 and the interest rate is 14.99%.

If you just make the minimum payment, you accrue $4,064 in interest; $1,509 if you make double the minimum payment; and $1,409 if you make the minimum payment plus $100.

If you’re sticking to the minimum because of financial issues, it may be a good idea to consider how many cards you need and what other expenses you can adjust so you can prioritize paying off your credit card debt.

Having Too Many Credit Cards

Credit Card Mistakes


A sizable chunk of people keeps more than one credit card, either because they want to increase their credit utilization or because they want to be able to manage or separate their spending. That said, it is possible to have too many cards and end up doing more harm than good.

Although having multiple cards with no balances can improve your score in the long run, spending habits can make this a counterproductive avenue. Petal Card notes that even opening or closing too many accounts at once can pull down your score.

The article goes on to discuss the main risks of having too many cards, namely: spending and bills can become harder to track, some points and miles may be lost or not maximized, and fees may eat up more financial resources.

If it’s becoming hard to manage or you are spending more on fees than actually making use of the cards, consider axing one.

Not Keeping Track of Your Annual Interest Rate

Credit Card Mistakes


Don’t skip reading the fine print. Ask questions about this while applying, and if you already have cards that you don’t know your rates on, check your monthly statement.

As long as you don’t make too many inquiries, you can also simply ask what your purchase Annual Percentage Rate (APR) is.

It’s a good idea to know about these things on the off chance that you’re paying more than you intended or you have a little balance you have yet to pay off in your account.

This also comes hand in hand with understanding the entirety of your account terms so you don’t end up with a dispute out of the blue. Plus, a lot of people end up basing their spending habits on the specifics of their credit card agreement.

Maxing Out Your Card

As much as possible, you don’t want to reach the limit of your credit card just because you can. It’s even more essential to avoid exceeding it. Based on research by The Ascent, over half of credit card users in the U.S. have maxed out at least one credit card.

The multiple negative outcomes that come from this include incurring a penalty in your interest, having to pay a limit fee, and hurting your overall credit score because of the high balance.

On top of that, maxing out your card means an increase in the payments you need to make if you want to avoid late fees and carried-over balance.

It’s good to keep the aforementioned variables in mind and put them into practice, particularly because it affects your financial independence. It’s even more important to ensure a good payment history and credit utilization if you’re worried about your credit score.

 Alice Green points out that payment history accounts for 35% of your credit score, which you can read up on more with other tips to improve your credit.