9 Mistakes to Avoid When Using a Credit Card

1. Missing a Payment

Payment history is the most significant factor in your credit score. It makes up a full 35% of your FICO^® Score^Θ, for example, and FICO^® Scores are used by 90% of top lenders. Your primary goal when using a credit card is to make at least the minimum payment each month, as required by the credit card company, but ideally to pay off your whole balance (more on that below).

If you don't pay on time, the card issuer could charge you a late fee, cut short any interest rate reductions you're currently receiving and report your late payments to the credit bureaus. That will negatively affect your credit. To avoid missing payments, set up autopay and sign up for email or text message reminders each month. Or make small payments multiple times per month—just make sure they all add up to at least the minimum payment each month.

2. Regularly Carrying a Balance

Paying off your entire credit card bill monthly has several advantages. You'll avoid interest charges on the unpaid balance, and you'll also keep your credit utilization rate low.

Credit utilization is the percentage of available credit used on each credit card and across all the cards you own. If you have a credit limit of $5,000 and a current balance of $1,000, your utilization rate on that card is 20%. Utilization can account for up to 30% of your credit score, making it nearly as important as your payment history. Planning to bring your balance to zero as you transition from one billing cycle to the next is the second most powerful way to protect your credit score.

3. Using Much of Your Available Credit Throughout the Month

It's not just important to pay off your balance when the bill comes due. Ideally, you'll also avoid racking up a high credit card balance at any point in your billing cycle. Consumers with the highest FICO^® Scores of 800 to 850—considered exceptional—used just 6.5% of their available credit on average, according to Experian data from the third quarter of 2022.

Experts say a worthwhile goal is to never let utilization rise above 30%, but to keep it below 10% if possible. That's most likely to help you earn an excellent score.

4. Letting a Balance Linger Beyond a 0% APR Promotional Period

With a good or excellent credit score, you may qualify for an introductory 0% APR credit card, which gives you a period of time to make purchases or to pay off a transferred balance interest-free. The flip side is that, at the end of the promotional period, your interest rate will jump to the card's standard APR.

With the average APR across all credit card accounts at 20.09% as of February 2023, according to the Federal Reserve, neglecting to pay off a major purchase or a balance transfer before that period ends could mean a big surge in interest charges. It's important to note that you're still required to make at least the minimum payment during the 0% intro APR period to keep your payment history blemish-free.

5. Sharing Your Credit Card Data

Your credit card number, expiration date and security code are sensitive pieces of personal data that are important to protect. If you receive a text message, email or phone call requesting your credit card data, don't provide it. In cases where the request could be legitimate but seems fishy, contact the source separately to double check. Credit card fraud can be sophisticated and difficult to detect, but operating from a place of skepticism any time your data is requested is a good start.

6. Missing Out on Rewards

Credit card rewards like cash back or travel miles can be a way to earn benefits for the things you're already spending money on.

If you can regularly commit to paying off your balance each month, consider, for example, paying monthly utility and subscription bills with your credit card, then opting for a cash back card that will essentially earn you a discount on those payments. Or, if you travel frequently on one airline to visit family, opt for a branded airline card that can get you free checked bags or lounge access. Just make sure the benefits will offset any annual fee you're charged.

7. Losing the Flexibility of Your Grace Period

Credit cards offer a crafty way to give yourself extra time to pay off big purchases: the grace period, which is the period of time between your statement closing date and your bill's due date. For example, say your card's monthly statement closes on May 31, and your bill is due on June 21. That's 21 days between the closing date and the due date during which you're not charged interest on purchases and not penalized if you don't make a payment yet.

In practice, that means that if you make a purchase early in the month, you have more than a month and a half, calculated from the beginning of your billing cycle, to pay it down. A crucial caveat: If you carry a balance from month to month, you lose this grace period, and interest charges will accrue starting from your statement closing date (and on all new purchases in the future). Also, balance transfers may not come with a grace period.

8. Taking a Cash Advance

Your credit card will often allow you to withdraw cash against your credit line, called a cash advance. You must pay it back with interest plus a cash advance fee upfront. The ATM or bank where you receive the cash advance may charge a separate fee. There's no grace period, so interest accrues right away, and your APR may be higher on cash advances than on purchases.

For all these reasons, cash advances are expensive, and there are many other ways to access lower-interest funding. You can try a personal loan from a credit union, which may help you even if your credit is poor; borrowing through a lending circle coordinated by a local organization; or even through your employer if it offers short-term loans.

9. Frequently Opening New Accounts

Regularly opening new credit card accounts could lower your credit score, particularly if you're new to credit, since there's a higher likelihood that you could mismanage those accounts.

New credit—which includes the number of new accounts, the number of hard credit inquiries and the age of your newest account—makes up 10% of your FICO^® Score. It's not a huge factor, but stay aware of its impact, especially if you don't have a robust credit history. You may receive lots of credit card offers, and being choosy about the ones you respond to will protect your score.

Making Credit Cards Work for You

There's no doubt that credit cards can be a way to accrue debt and sink your credit—but not if you have a strategy for putting them to work. Ideally, you'll avoid carrying a balance, pick the card(s) that are most likely to earn you lucrative rewards and make larger purchases with an eye to your grace period. Avoiding these common mistakes will help you not only increase your credit score, but boost your confidence that it's possible to take control of your financial future.