Whether you’re using a credit card for the first time or you’ve carried one for years, mistakes happen. And while a credit card mistake can affect your credit scores, there’s no need to be hard on yourself. With some habit changes and a bit of time, you can begin to see your credit scores heal.
Here are some common credit card errors and tips for getting back on track.
Missing a payment
You’re in the middle of a hectic week and lose track of time. That’s when you notice the late fee on your credit card. If this happens to you, it’s always worth calling your credit card issuer. You might be able to get the fee waived if you ask, especially if you’ve never missed a payment before. Plus, the late fee serves as a warning since your credit scores won’t be affected until you’re more than 30 days late, which is when the missed payment would get reported to credit bureaus.
How missing a payment can be harmful: Not only is that late fee an added expense, but a missed payment that’s more than 30 days late can drop your credit scores substantially — sometimes by as much as 100 points.
How to avoid this in the future: Create an ironclad reminder system, like email or text alerts from your credit card issuer. You can also set up automatic credit card payments each month, but be sure you have the money in your bank account to cover your bills so you don’t get charged overdraft fees. Some cards allow you to choose your due date, so you can time payments with a memorable day, such as the first of the month or the day after your paycheck is deposited into your account.
Maxing out your credit limit
It can be difficult to avoid charging more than the recommended 30% of your total credit card limit, especially if you have a low limit to begin with or you’re faced with an unexpected major expense. In an emergency situation, you may need to tap into your credit limit and that’s OK. But if you’re routinely maxing out your card, you’re potentially damaging your credit over time.
How maxing out your credit limit can be harmful: Your credit utilization, or the amount of your total available credit you charge, is a factor in the calculation of your credit scores. Generally speaking, the lower your utilization, the better.
How to avoid this in the future: Cut back on using your credit card for every single purchase. You can use your credit card for some expenses each month and then turn to cash or your debit card for everything else. If you have a low credit limit, call your issuer to see whether you’d be eligible for a credit limit increase. Update your card issuer on your income if it increases, as this can help you qualify for such a hike.
Spending more than you can afford to pay back
Compared to handing over all the cash you have in your wallet, paying with a credit card just doesn’t feel like you’re spending real money, which can make it easier to spend more. That can lead to a rude awakening when your credit card bill arrives, especially if you don’t have enough in your bank account to cover it.
How going over budget can be harmful: By their very design, credit cards can lock you in a cycle of expensive debt because you can charge up to your credit limit, pay just a small portion of your bill, and then charge up to the limit again next month. After a short time, your debt can grow to thousands of dollars.
How to avoid this in the future: Don’t just hand over the plastic without a second thought. Check your balance several times throughout the month, and if you have a big expense coming up, plan for it by setting money aside to pay for it. If you’ve already overspent, switch to cash or a debit card while you pay down the debt. Setting up a budget can help you feel more in control of your money.
Closing a card account without a strategy
Deep cleaning your wallet might feel satisfying, but you don’t have to break out the scissors just because you don’t use a card that often anymore. Closing a credit card is sometimes the right move, but it can affect your credit scores. Because of this, you may want to consider ways to keep the account open.
How closing a credit card can be harmful: Closing a credit card you’ve had for a long time can lower the average age of your credit card accounts. When it comes to your credit scores, older is better. Plus, closing a card means a lower total credit limit. If your spending remains the same, that increases your credit utilization.
How to avoid this in the future: There are good reasons to close a card, like not wanting to pay an annual fee on a card you no longer use. But you may have other options, such as downgrading the card to one without an annual fee, which lets you keep the account open at a lower cost. Be sure to use that card a few times a year to keep the account active. If it sits in a drawer for too long, the issuer may close the account because of inactivity, and you’ll face the same result as if you had canceled the card yourself.
Paying your credit card statements without looking
While you can put your credit card payments on autopilot, take an active role in monitoring your account because errors can happen. You may have no idea unless your credit card company contacts you about possible fraud.
How ignoring credit card statements can be harmful: Suspicious charges, even in small amounts, can be the first sign that your credit card information was stolen. By law, you’re not liable for more than $50 of fraudulent charges, though most cards waive your liability entirely. However, you do need to report the fraud. If you consistently pay your credit card bill without reviewing the charges listed on it, you may be paying for expenses someone else racked up in your name.
How to avoid this in the future: Check every credit card statement before you pay it. If you have autopay set up, create a reminder to review your account every month. Any time you see an unfamiliar charge, call the number on the back of your card to report it. The credit card company will issue you a card with a new number.