Man holding a credit card

Credit cards are a great resource for building and maintaining credit. However, if your credit line is not managed properly, trouble is sure to follow. Here are five mistakes you could be making with a credit card and ways to fix them.

Exceeding the introductory rate window

Credit card companies may offer a special introductory interest rate if you agree to make the minimum monthly payment on time. If you carry a balance beyond that specified period — or fail to make payments on time — a higher Annual Percentage Rate (APR) goes into effect.

Solution: Break down the purchase of an item into manageable payments that fit your budget. Ideally, it’s best to have enough money to pay off your card balance before the higher interest rate takes effect.

Getting hit with cash advance fees

Beware the temptation of cash advances. Between potential upfront fees and higher interest rates, you could be stuck paying back that short-term loan for a long time.

Solution: Consider a credit card that charges low fees for cash advances and no fees for balance transfers.

Paying just the monthly minimum

Another potential pitfall is only making the minimum monthly payment on your card. Depending on how much you owe, it could take decades to pay off that debt. Creditors are required by law to report on your statement how much you owe, how long it will take to repay it, and how much interest you’ll end up paying.

Solution: Review your statement details carefully to determine how much more than the minimum you’ll need to pay every month to eliminate the debt in the shortest time frame while paying less interest.

Making payments after the due date

Paying your bill late can damage your credit score, making it difficult to secure a loan or in some cases, get a job. Fees and higher interest rates may be added, increasing your debt load. Look at your statement every month and pay the bill as soon as it arrives.

Solution: Try using automatic bill pay through your checking account to ensure your payment arrives on time.

Closing a long-term account

A long and stable relationship with a credit card company can be a good thing. But if you close a card you’ve had for a long time, it could lower your credit score. Specifically, it could impact how potential creditors view your ratio of debt to available credit when you try to get a loan.

Solution: Consider keeping your oldest card open. Periodically use it to make a small purchase you can easily pay off, to avoid your credit score being lowered due to inactivity.

Watch out for these credit card do’s and don’ts to avoid damaging your credit and paying more money than you need to.

The advice provided is for informational purposes only.

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