by: Janna Weiss

Credit cards offer us convenience, buyer protection, and even a boost to our credit scores. But they can also ruin your credit if you don’t use them wisely. Let’s take a closer look at five common mistakes new cardholders make, and how you can keep yourself from following suit.

Mistake #1 – Having Too Many Cards

It’s true that having a lot of available credit is good for your credit score. But applying for a lot of cards at the same time will raise lender’s eyebrows. Plus, having too many credit cards proves to be too much temptation for some zealous shoppers.

To avoid this mistake, pick two or three cards with low interest rates and credit limits of $2,500 or more. Don’t apply for more. If you have too many credit cards already, closing your accounts will lower your credit score. Instead, pay off the extras and only use them for a small purchase every few months to keep the accounts active.

Mistake #2 – Ignoring the Fine Print

Credit card terms and conditions can be hard to understand, but you have to try. Ignoring the terms and conditions won’t make them go away. Many cardholders are taken by surprise when their interest rate suddenly spikes or their credit limit goes down.

Don’t make this mistake. Read through your terms and conditions. If you have trouble understanding the phrases, call your credit card’s customer service number or do an online search for a credit glossary.

Mistake #3 – Not Reading the Statements

Reading your monthly statements is at least as important, if not more so, than reading your terms and conditions. If you don’t keep track of your monthly charges, you could be paying for a lot of stuff you didn’t even buy.

Credit card fraud is rampant, so check your monthly statements for unauthorized charges. Some crooks try to sneak in small charges, ten dollars or less, hoping that you won’t catch on. Whenever you find a charge that you didn’t make, call your credit card issuer to report the fraud.

Mistake #4 – Making Minimum Monthly Payments

Minimum monthly payments typically range from 2% to 5% of your total balance. If you only make payments at this rate, it will take years to pay off your credit cards. Your lenders won’t mind, though; every month that you carry a balance, they get to collect interest payments and financing fees.

Making minimum monthly payments will keep you in debt for a very long time. Whenever possible, double up on payments to get your credit card balances down to a manageable size.

Mistake #5 – Overspending

This one seems obvious, but it’s a real problem for many consumers. When you see something you just have to have, credit cards make it easy to impulse shop. This is how debt horror stories get their start.

Before you make a purchase with your credit card, sit down and take a hard look at your finances. Can you really afford it? Do you really need it? How much will your monthly payments be, and how long will it take you to pay for the item? By answering these questions before you buy, you are taking control of your finances.

Credit cards are a modern convenience, but only if you use them in the way they’re intended. Use this article as a reference when you find yourself slipping into bad credit habits.

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