It's easy to fall into bad habits. A one-time exception becomes part of your routine. Before you know it, you’re stuck in a rut that’s next to impossible to escape.
Bad credit habits can wreak havoc on your credit score, lead you into debt, and cause many other financial problems. These problems threaten your stability and long-term goals. Consider your credit habits, and if you’re doing any of these, replace them with a better habit right away.
Not Reading Your Credit Card Statements
With lots of different bills coming in the mail—or arriving through email—it can become overwhelming every month. Reading and reviewing each of them can be mind-numbingly boring, not to mention time-consuming. Some you can get by with a skim reading, but there are benefits to fully reading your credit card statement. It is one of the best ways to catch unauthorized charges and billing errors.
Don't just check your credit card statement for your balance and payment information. Review the entire statement to verify your account activity. Report errors to your credit card issuer right away to prevent being held liable for charges you never made.
Not Reading Your Credit Card Statements
Don’t take for granted that your available credit is the same as when you checked your credit, especially if you last checked several days or weeks ago. There’s a chance you forgot about some purchases, payment wasn’t applied correctly, or that your credit limit was lowered since you last checked.
A quick phone call or tap on your smartphone app will quickly confirm that you have enough available credit for your purchase. Plus, it saves you the embarrassment of having your credit card declined if that you don't have enough available credit.
Pulling out Your Credit Card Instead of Your Debit Card
Unless you’re using your credit card to rack up rewards and you pay off your credit card balance every month, you shouldn’t opt to use your credit card over your debit card. Your debit card is your direct access to the funds you should use for everyday purchases, like groceries, gas, clothing, and other expenses. If you use your credit card, it should be a conscious decision with a concrete plan for paying off what you’re charging.
Paying Only the Minimum
It’s so much easier to make the minimum payment than to figure how much extra you can afford to put towards your credit card bill. But, when you’re making only the minimum payment, you’re not making much progress toward paying off your credit card bill. And unless you have a very low balance or a 0% interest promotion, you’re probably paying much more in finance charges than you have to.
Send more than the minimum if you can or at the very least, pay the amount required to pay off your balance in 36 months, which is also printed on your billing statement. You'll save money on interest, plus you put yourself closer to having your balance paid off completely.
Habitually Paying Your Credit Card Late
You can schedule your credit card payment days in advance. There’s no excuse for habitually late payments. If you constantly forget to send your credit card payments, you need a system to get rid of this bad habit and start paying your credit card on time.
Paying on time saves you money in late fees and higher interest rates. Plus, it protects your credit from the effects of late payment.
Transferring Balances to Avoid Payments
Balance transfers promotions are an excellent strategy for paying off a high-interest rate balance. If you’re constantly chasing balance transfer promotions to avoid paying payments on your credit card, you’re engaging in a bad habit that could hurt you in the long run.
Balance transfers typically have fees that will increase your overall balance if you’re never making payments toward the transfer. And if you’re making purchases on the card with a balance transfer promotion, you’re compounding the problem.
Credit card issuers make the rules in this game. Eventually, they’ll make a move that will kill your strategy—your available credit won’t be high enough for the balance transfer, you won’t qualify for the promotional rate, or worse, your application will be denied altogether.
Taking out Cash Advances
Cash advances are one of the most expensive types of credit card transactions. They typically have the highest interest rate, and they don’t have a grace period, so you start being charged interest right away. On top of that, you have to pay a cash advance fee each time you use your credit card to get cash.
Your credit cards should never be a source of cash, so if you’ve fallen into this habit, stop right away. Figure out a way to cut back on your spending, so you have more cash from your salary or wages, and you won’t have to rely on your credit cards for cash.
Applying for New Credit Cards You Don't Need
Low-interest rate promotions and sign-up bonuses are so inviting. You may sign up for every new promotion that’s offered, even if you already have enough credit cards. It’s a slippery slope. Not only can new credit card applications hurt your credit score, but they can also create an opportunity to get into debt. One month you’re handling your credit cards well and then a few credit cards later, you’re in over your head.
Buying Things You Can't Afford
Next to habitually making late payments, this is arguably the worst credit card habit to have, and how you get into debt. If there are things you want but can’t afford to pay for them, you should wait to purchase them until you can afford them. The satisfaction you get from having things now won’t comfort you when you dealing with the debt you created to get those things.
Before you swipe for a purchase, always assess whether you can truly afford it. If you can’t, be brave enough to deny yourself the instant gratification for a financial peace of mind later on down the road.
Letting Credit Cards Go Unused
In a way, not using your credit cards can be just as bad as using them too much. If your credit cards go dormant for too long, many credit scoring formulas disregard them in your credit score. On top of that, your credit card issuer may cancel your credit card after you haven’t used it for several months. Use your credit cards at least once every three to six months to keep them active.