Credit Card Mistakes I’ve Made (And How You Can Avoid Them)

I was going through the mail and opened up a credit card statement. Missed payment fee of $25? On a $89.47 bill? Ouch! I had just made an expensive mistake, one of many credit card mistakes I’ve made in the 30 years since I got my first Visa.

Credit card mistakes make life more convenient, but they can devastate your finances by adding debt without adding significant assets. Have a mortgage? You probably have a house. Have a car loan? You probably have a car. Have credit card debt? You might have a closet full of clothes, or even missing memories from too many wild nights.

In other words, credit cards need to be approached with caution. Lots of personal finance folks like Dave Ramsey caution against using credit cards for any reason.

People do use credit cards, though. According to the Federal Reserve, Americans held over $950 billion in credit card debt in April 2016. While many Americans struggle to manage credit card debt, others manage credit card use responsibly and benefit from rewards programs and other benefits.

I like to think I use credit cards responsibly now, but that hasn’t always been the case. I spent my early 20’s digging myself into credit card debt, and my late 20’s digging out and reestablishing my credit. I made a bunch of credit card mistakes. I paid a bunch of fees and interest. I learned how to manage my risk, and to only make charges when I had the money in the bank to back it up.

Yet I still missed a payment and incurred exra fees and interest. I made a silly mistake that with a couple of simple adjustments I would have avoided.

In retrospect, all of my mistakes could have been avoided. So I thought I’d confess to my credit card fails, so that you don’t have to make them. because credit card mistakes can be costly.

The College Mistake:  The Balance Builds Up

Like a lot of kids in the 1980s I got my first credit card as a college freshman. At first, I was really good about paying my balance off each month.

And then I had car trouble and a big bill to pay.

I put the repair on the card, and I didn’t pay it off entirely. I paid part of it and kept on charging like normal. Only now I was paying compound interest too. The balance fluctuated, but it was going to be a long time before it went away entirely.

I should have stopped charging anything and concentrated on getting back to a zero balance. I should have adjusted my budget to account for paying off the card and paying for future car maintenance.

Instead, I just kept merrily spending and paying a convenient amount that didn’t cause me to change any of my behavior.

Takeaways:

  • A credit card is not an emergency fund or a budgeting tool. If you need to use your credit card to pay for a need, you probably need to adjust your savings and budgeting approaches.
  • Don’t carry a credit card balance. If you do run up a balance, stop making additional charges and prioritize paying off the card.

The Early 20s Mistake: Minimum Payments and A Big Balance

My merry spending and lack of budgeting led more credit card mistakes.

I had more expensive car repairs that I didn’t pay off. My unhappiness with my chosen career path in political science led to spending on frivolous distractions, like boredom shopping on credit.

I accrued bigger balances, but I paid on time. My credit card company rewarded me with a raised credit limit, even though my income was unchanged.

Eventually, my credit card balance overwhelmed me. I owed more than I made over the course of a few months. I started making minimum payments and my balance got larger each month.

Then I dropped out of grad school and lost my stipend. I struggled to figure out my next step, but I had a big credit card balance and no way to pay it. I fell behind. Eventually I landed a couple of jobs and began paying it down, but not before I was in collections with bad credit.

Takeaways:

  • If you have a credit card balance, make sure you always pay more than the minimum. Paying minimums can allow your credit card balance to grow even when you aren’t making purchases. You’ll end up paying more interest and having a balance much longer.
  • Your credit allowance may exceed your ability to pay. When your credit limit gets bigger though your income stays the same or shrinks, it’s important not to inflate your credit usage. Keep your credit card bills within the realm of what you can reasonably pay off.
  • Avoid boredom shopping and other frivolous uses of money when your income situation is insecure. If you are unhappy with your situation, saving money and putting yourself in a better financial situation will help you change it for the better. Spending extra puts you at a lot of risk.

Credit Card Mistakes I've Made (and how to avoid them)

More Credit Card Mistakes

It took a while to pay off my credit cards and reestablish credit. I didn’t have a credit card for the latter half of my 20’s. By the time I got another card, i was a lot more careful, and my mistakes didn’t pose as much danger to my financial well-being.

I kept my balance under control and didn’t carry a balance for more than a month or two. I limited

Let’s admit to a couple of mistakes, though.

I carried all of my credit cards all of the time, including on vacation. When my purse got stolen on a drive to Florida, that became a problem. All of a sudden i was desperately searching for phone numbers and account numbers to cancel cards. In retrospect, two of those cards (particularly the company card I was never going to use that week) should have been locked in a desk drawer at home.

After that incident, I let the credit card company talk me into credit monitoring services. I spent $7 a month for a couple of years for something I now know I can get for free.

I didn’t always check my statement as carefully as I should. I ended up paying a couple of mysterious iTunes charges because I didn’t challenge them on time.

While none of these mistakes torpedoed my credit, I could have avoided all of them.

Takeaways:

  • Don’t carry credit cards you don’t need, particularly on vacation.
  • Credit cards will try to sell you add-ons and extras. They are rarely good deals. Even if something sounds like a good idea, make sure that you are getting it from the best source.
  • Check your statements carefully. You have a limited window to challenge fraudulent charges. Once that time period is over, you have to pay.

My Latest Credit Card Mistake: A Lost Statement

Last month, I looked at Little Bit and noticed that she was wearing fleece pajamas in May.

“Why are you wearing those? It’s kinda hot for those. What about your rainbow nightgown or those minion pajamas with the shorts?”

“They’re in the dirty clothes.”

Hmm…I thought back in my head and realized Little Bit had grown out of most of her summer weight pajamas the previous summer. Darn kid keeps growing! I got her to change into a t-shirt to sleep in that night and the next day we went shopping for PJs and shorts.

I use the same credit card for almost everything, an Amazon Rewards Visa. It makes life simpler and gives me points I can use to help fund my Christmas shopping. For this one department store which will remain nameless today, though, I use a store credit card.

I generally don’t open or use store credit card accounts, but this one provides really good discounts for cardholders. I use it two or three times a year, take the discount and pay off the card when I get the statement.

I didn’t get the statement.

We vacationed at beach for a week at the end of the month and had our mail held. By the time we got back, the post office delivered a pile of mail a foot high. Either the bill got lost in the pile or never made it out of the post office, but I never saw the May statement.

It didn’t raise a flag. I only get statements when I use the card, so I wasn’t suspicious when we got home and I didn’t have a statement. I wasn’t tracking the billing cycle, and I lost track of when I should have gotten a bill. 

And then I forgot. Kind of. I still looked for the bill in the mail daily. On at least one occasion, I thought about taking my card and a checkbook to the store and paying off the card.

Yeah, I didn’t do that. I didn’t call the account number to check the status. I didn’t go online to check the account..

So I wasn’t entirely surprised when I got the June bill and saw the missed payment. I was disappointed in myself for not acting on my suspicion that not all was hunky dory in the land of credit cards.. I was frustrated that whatever savings I’d gotten from using the card had been eaten up by fees and interest.

Takeaways:

  • Keep track of your billing cycle and charges. While I track my spending, I wasn’t tracking the billing cycle for the card. Card payments are supposed to be due on the same day each month, give or take a weekend. I should have known that for a charge made on the 15th, I would be billed by the end of the month. That knowledge should have prompted me to take the three minutes to check on the bill.
  • If you do miss a payment, pay as soon as you know. While late payments are one of the biggest hits on your credit score, most creditors won’t report late payments if you pay before the next due date and usually pay on time. That doesn’t mean they can’t, though, and it will be a few weeks before I know if my credit score was affected.
  • Sign up for email notifications. I immediately changed my billing preference for the card from paper to online. I did this with my main Visa, and probably should do so even with the other cards I never use. I monitor my email closely and it’s unlikely that I’ll overlook or miss an emailed bill.

How to Avoid 6 Big Credit Card Mistakes

A Manageable Risk

Having and using credit cards adds risk to your financial health. Even people who try to act responsibly can find their credit scores compromised or accrue extra expenses through fees and interest.

As I have so (not) cleverly demonstrated, credit card mistakes can be pretty costly. Heck, on a percentage basis, I’m paying an additional 30% for kid’s clothes because I overlooked a single payment.

It doesn’t take long for a few minor errors on your part to blow a hole in your budget.

Big errors, like running up bills you can’t pay, can take years to overcome and derail your other financial goals.

To manage your risk, you need to be smart and careful about how you use credit cards and how you pay credit card bills. Know what to do, know what not to do, and try not to learn lessons the hard way.

Leave the errors to me.

What credit card mistakes have you had to learn? What tricks have you developed to avoid making costly mistakes?

This posts contains affiliate links. 

“Excited Female Cutting Her Credit Card” Image courtesy of stockimages at FreeDigitalPhotos.net, with changes.

*Part of Financially Savvy Saturdays on brokeGIRLrich, Disease Called Debt and Money Can Buy Me Happiness

27 thoughts on “Credit Card Mistakes I’ve Made (And How You Can Avoid Them)

  1. I’m so glad regulations have changes and credit card companies can not longer camp out on college campuses trolling for unsuspecting applicants.

    We made so many mistakes with credit cards. We used them as an emergency funds, and to live way beyond our means. We only paid minimum payments for years.

    We are learned better now. They should be used as a tool, never carry a balance, paid in full each month. If you can not follow these steps I would suggest not even having one.
    Brian @ debt discipline recently posted…What Financial Health Means to MeMy Profile

  2. Ah, we’ve all been there.
    Now, we use cards for the rewards and pay them off completely each month. The bills come to my email AND I have automatic payment set up so even if I’m off the grid camping, they’ll still get taken care of. Most months, though, I scour that statement the moment it arrives to track my expenses and look for errors. That way I can challenge any questionable charges before the payment is made.
    Julie@ChooseBetterLife recently posted…Are You Hiking This Summer? Read This First!My Profile

    • We don’t travel too much, only for a week or so at a time. But great thought…you really have to take care of getting bills (especially credit card bills) taken care of if you are going to be traveling or otherwise unable to access your accounts as usual.

  3. Great advice, Emily! We have a few cards we use for rewards, but faithfully pay them off each month. It’s funny, just a few months ago, I had the same thing happen and had to pay a late fee on one of my cards. I knew it should have come in the mail, and kept thinking it would but, like you, I put it off too long. First time that’s ever happened, but lesson learned!

    On our recent trip to Florida, my husband and I cleaned out our wallets and only took the essential cards (and each of us had at least one card different from the other in case of theft and we needed $$). We wrote down the names of the cards (not the cc#s) with the associated 800 number for each cc company each of us were carrying and then exchanged, so he had a list of what I was carrying and vice versa. This is the first time we’ve done this, but it made me feel like we could deal more easily with a theft if it happened.
    Amanda @ centsiblyrich recently posted…Investing vs. Mortgage Payoff Experiment: Suggestions, opinions, and our progressMy Profile

    • Good job! That’s a great way of traveling smart. It’s a good idea too to carry at least 2 different cards between you, too. i know of at least a couple of times we’ve needed to use a different card than planned (Jon’s favorite card has a tendency to deny “suspicious charges” aggressively. We almost lost our honeymoon reservations for that reason.)

  4. I think we’ve all made at least one of these mistakes in our time. I just made the opposite of your missed payment mistake: I double-paid my credit card bill with one payment initiated from the bank and the other where the card company deducted from my bank account. While this didn’t hurt my credit, it did tie up some money for a bit. Generally these days I’m on top of our credit card bills though. We use Quicken to enter each transaction as it occurs, look to see when the last bill was paid (so we know when to expect the next one) and “balance” our credit card statement against our records. This way we know before the bill arrives how much we’re spending and roughly when we need to pay it, plus we can spot errors.
    Gary @ Super Saving Tips recently posted…What Financial Health Means to MeMy Profile

    • It’s a good idea to track purchases as you go. I do, but I didn’t look back at the date for the one I missed the payment in and thought it was later in May than it actually was. But at least I can verify charges and totals.

  5. The only time I use the one store card I have (for the home improvement store where I work) is when I can get a no interest finance offer that I make sure to pay off by the end of the promotional period. I wish I could say that my other cards have no balance after paying them off a few years back, but I did not properly budget for car repairs or cat surgery when my income decreased.

    I think knowing what I should do and doing what I should do are two different things. Tracing your credit card spending back to unhappiness in your career path at the time makes sense. I feel like buying things (on credit or not) is actually fun a lot of the time, but the fun doesn’t last (obviously) and does put me at risk when it adds up, as you pointed out. I still struggle with this.

    • It’s a common struggle. I got unhappy and bought things that I thought made me a little happier. Now I’m a lot more careful to watch my spending triggers and adjust my behavior.

      I really do think in my 20s I was just clueless about money, credit, and budgeting. Some of us only learn lessons the hard way.

  6. Great post! I love the infographic. We’ve missed a payment once or twice although I’m glad to report it hasn’t happened in a few years. Thank goodness for email and text alerts. Still, I use my Kohls card so infrequently that once in a while I panic, wondering if I missed a payment. Thanks for this reminder-I need to set up an alert on that account.
    Mrs Groovy recently posted…Geoarbitrage and Financial IndependenceMy Profile

    • Thanks, Mrs. Groovy. Yeah, I set up email alerts immediately because I really don’t want any more carelessness penalties.

  7. This post stings a little bit, as my wife recently missed a payment on her credit card and incurred a $25 late fee. This never happens to me, as I have an e-mail alert set up for our primary credit card. I suppose we all get nailed once in a while, but it is very frustrating.
    FinanceSuperhero recently posted…Managing the Cycle of Failure and SuccessMy Profile

    • I am really careful about our primary card. I know it’s been used each month, so even when bills for misplaced I still made sure it for paid.

      It’s this little card I never use where I had the problem.

      If you can, get all of your cards set up with alerts. That will help you not miss an odd payment, but also help protect against fraud of someone else used it.

  8. I’m always amazed at the balances people carry on credit cards. My parents told me years ago that paying interest was dumb and that if I couldn’t afford it I shouldn’t buy it.
    RAnn recently posted…Kickfurther Is ChangingMy Profile

    • You were smart to listen to your parents, and lucky to have parents who talked to you about debt and credit. I know that I’m trying to teach my daughter to be smart about her money, and I wish I had done a better job of understanding credit and debt before I got either.

  9. I’m always amazed at the balances people carry on credit cards. My parents told me years ago that paying interest was dumb and that if I couldn’t afford it I shouldn’t buy it.
    RAnn recently posted…Kickfurther Is ChangingMy Profile

  10. I’m in the UK. Luckily over here the minimum payment has to be larger than the interest charged – but it can still take 20 years to pay off a credit card if you only pay the minimum.

    One mistake I see that is really common among people who think they are good with money is that they they carry large credit card balances at 0% – cheap money right? Well not when you get refused the mortgage you want because your mortgage lender thinks you have too much unsecured debt…

    • Good point, Sara. Carrying a lot of debt (even secured debt) can keep you from being able to get loans for things that you want or need if your overall debt ratio is too high, and using a lot of your debt capacity lowers your credit score (which can raise the price of borrowing).
      It’s also pretty easy (at least in the US) for 0% to become 15% or even 29.99% quickly if you miss a payment. And those 0% rates never last long.

  11. You make some really valid points here. Credit cards can be a good tool to use at your advantage, but you have to learn how to tailor it to your budget. Nice pointers! Thanks for sharing your story and lessons learned!

  12. Paying more than the minimum balance is something I always try to do to make sure I’m not running up my balance on the statement. The interest rates on credit cards are so high, it can really kill anyones budget.

    • Yes. I try to keep mine paid off, but in the cases where I couldn’t I at least made a plan to pay the card off as quickly as possible and didn’t use the card again until it was paid off.

  13. Great infographic and great incite into how credit cards can be dangerous! It’s just important to keep a zero balance! Thanks for sharing.

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