5 common credit card mistakes and how to avoid them

U.S. financial consumers are big credit card users. A recent survey by Experian found 62% of Americans have between one to five credit cards.

With that much familiarity, you may think consumers know how to optimize their card experience. But ask the average card user about common (and costly) credit card mistakes and you’ll get an earful.

“A couple of years ago, I was traveling to the USA for a holiday with my family,” said James Gall, founder of the U.K.-based Money Builders, a consumer financial website. “I wanted to take a credit card and after some research found a card that charged zero commission on dollar transactions while in the U.S.”

While traveling abroad Gall could use the card in any store or restaurant with zero fees — a big advantage on a pricey vacation.

“I ran up a couple of grand worth of debt on the card, however, I neglected to pay full attention to the high-interest rate once we were home. I ended up having to transfer the debt to another card after clocking up way too much interest at a horrendous rate," explained Gall, who said he made a fatal mistake with credit cards.

“I didn’t read the fine print,” he acknowledged.

5 of the biggest credit card fails users make

Mistakes, bloopers, brain cramps – call them what you like. Consumers routinely make costly mistakes when they flash their plastic. These are the most common and costliest unforced errors card users make, according to financial specialists.

1. Using debit cards instead of credit cards when shopping online
2. Missing out on extra cash rewards
3. Assuming credit card debt is forgiven
4. Not being careful when you cancel a rewards card
5. Only making minimum payments

1. Using debit cards instead of credit cards when shopping online

Never ever use a debit card when buying products or services online, experts advise.

“If you get ripped off, a debit card offers extremely limited protection, and if you fail to catch a false charge quickly enough, you could literally lose every last penny in your bank account,” said Monica Eaton-Cardone, owner of Chargebacks911, a cybersecurity firm that works with credit card providers. “Credit cards protect you far more comprehensively. That's because credit cards are federally protected from the major fraud categories, but unfortunately, the same protections aren't extended to debit cards.”

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2. Missing out on extra cash rewards

These days, many reward credit cards offer bonus cash back or points when using the card at a certain merchant – but card users don’t always tend to take full advantage.

“These bonus offers can change on a monthly or quarterly basis, but they’re easy to overlook and miss if you aren’t checking your email alerts or signing into your credit card account on a regular basis,” said Andrea Woroch, a consumer finance expert at AndreaWoroch.com. “Don’t assume you automatically qualify for the extra rewards. You have to actually opt-in to the offer to qualify.”

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3. Assuming credit card debt is forgiven

Not only is it important to keep your credit card balances low for your own financial health, but also for your family’s financial well-being.

“That’s because debt usually gets passed down to your family -- your spouse, children or parents -- if something happens to you,” Woroch said. “Therefore, it’s important to have a back-up plan, like a life insurance policy, [which] can protect your family’s financial future as it can be used to pay off your debts including a credit card balance.”

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4. Not being careful when you cancel a rewards card

Many credit cards have proprietary points systems that don’t favor canceled cards.

“These can be incredibly lucrative and can be pooled across multiple accounts, but once you close the last of your accounts, those points disappear so make sure you use them up or transfer them out first,” said Erik Budde, chief executive officer at GigaPoints, a credit card advisory platform. “Even a savvy credit card user like myself has made this painful mistake – it cost me about $1,000 in lost points.”

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5. Only making minimum payments

While cardholders should be making regular payments on credit card bills, going low and only making the minimum payment each month can trigger financial issues. “Doing this will slowly lead you to incur more debt each month and cause you to pay higher interest payments,” said Tegan Phelps, founder of The Blissful Budget, an online household finance platform.”

“To avoid this mistake, make sure you either have the money to pay off the balance in full each time you use the card, or make extra payments throughout the month to avoid racking up unnecessary debt,” Phelps said.

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