Avoid These Five Credit Card Mistakes Before They Bring Down Your Credit Score

A credit card has become an indispensable tool for making payments and building a good credit score these days. It lets you earn rewards even as you spend money. However, the benefits of a credit card only accrue to those who use it wisely. On the other hand, many cardholders fail to make the most of their credit cards and hurt their credit score.

There are several pitfalls to avoid when it comes to owning credit cards. Here are some of the costly mistakes that you must avoid to ensure your credit cards don’t hurt your credit score.

1. Paying Only The Minimum Due Amount

You may think that you are saving on your expenses by paying the minimum due on your credit card, but the truth is, it comes at a cost. Not clearing your debt means you will have to pay higher interest charges on your outstanding balance. On top of that, the repayment period also gets extended when you pay only the minimum due amount. It also keeps your credit utilisation ratio high, which could lead to a negative credit score.

2. Applying For Several Credit Cards Simultaneously

Every time you apply for a credit card, the bank makes a hard inquiry on your credit report. While this can be bad for your credit score, a single inquiry is usually not something to be worried about. However, if you apply for multiple credit cards at once, it will result in multiple hard inquiries in a short period. This can hurt your credit score severely.

It is advisable to have at least a six-month gap between two consecutive credit card applications. 

3. Missing Payments

Most credit card issuers charge late fees for missed payments. Along with that, you could also face higher interest rates due to late payments. Ultimately, this not only damages your credit score but can also gets you caught in a dangerous debt trap. You may also miss out on the benefits that the card typically offers.

4. Closing Old Credit Cards

You may want to shut down your credit cards if you find it difficult to use them properly. But this can also hurt your credit score. Closing a credit card leads to the erasure of the credit history associated with a card. Moreover, it can also increase the credit utilisation ratio. Both these factors can harm your credit score.

5. Not Checking Your Credit Card Statements

You must check your credit card statements regularly so that you can spot any suspicious transactions. This will help you detect fraudulent activity and any possible errors. In case you notice any issues, you must resolve them with your credit card issuer.

To conclude, credit cards are convenient for making payments and reaping rewards. But you need to be cautious enough when it comes to using credit cards to maximise benefits. Following a few simple but effective habits, such as paying your dues on time, will go a long way in ensuring a healthy credit score.