Credit cards can be great financial instruments when used correctly. They not only help one have a seamless shopping experience but also come in handy in financial emergencies. However, improper management of credit cards can increase the risk of financial issues and a drop in credit scores. To avoid these problems and make the most of this tool, it is essential to steer clear of the following common mistakes when using a credit card:

1. Missing payment due dates
A crucial mistake to avoid when it comes to using and managing credit cards is missing payment due dates. One may miss the deadline due to factors such as not keeping track of due dates or shortage of funds, but this mistake can be quite costly. If one misses out on paying their credit card bill, they may have to face substantial penalties and heightened interest rates. Moreover, it will adversely affect their credit score. To avoid facing such issues, it is better to keep track of the due date and ensure the availability of sufficient funds at that time. Also, if one does not have enough money to pay the bill at the time, they can always make the minimum payment in that month to avoid penalties. However, this should not become a habit.

2. Making minimum payments
Credit cards offer convenience to users in several aspects, including their bill payments. One of the features here is the option to pay a minimum amount before the due date without attracting any penalties. This means that if the user can not pay the full amount at times, they can pay the minimum amount at that moment and pay the remaining balance in the upcoming month. While this is a great feature, many cardholders end up making only minimum payments. If this persists, it can result in the accumulation of interest, making it increasingly challenging to fully repay the outstanding amount. Further, a pattern of only making minimum payments can have adverse effects on the credit score. To avoid this, one must make the full payment whenever possible.

3. Overspending
It is common for credit card users to feel the temptation to buy things that are out of their budget or make impulsive purchases. Moreover, with the financial flexibility that credit cards offer, these urges may become all the more frequent. However, spending more than what one can afford may prove to be an expensive mistake. Over time, these expenses will add up, and one may find themselves low on funds. Further, it can lead to pending bill payments, accumulation of debt, and high interest charges. So, when using credit cards, it is better to set a budget and keep track of all expenditures.

4. Opting for cash advances too often
Another great feature of credit cards that is a boon in times of crisis and emergencies is the option of getting cash advances. This means that one can withdraw a certain amount of cash against their credit using their credit card. However, this convenience often comes at a high cost. Cash advances carry high interest rates, additional fees, and the absence of a grace period, so interest starts accruing immediately. This makes cash advances one of the most expensive ways to borrow money. So, it is advisable to keep this option reserved only for emergencies when one is in dire need of cash and has no other way to withdraw it.

5. Not checking monthly statements
Neglecting to check monthly credit card statements and bills is one of the key mistakes to avoid. It is crucial to check the statement before making payments in order to ensure that there have been no fraudulent or unauthorized transactions or billing errors. If these go unnoticed, scams and unauthorized transactions will go unreported. On top of that, the cardholder will face financial losses by paying more than they actually spent.

6. Maxing out credit cards
Maxing out credit cards, i.e., utilizing the entire available credit limit on the card, may seem like a valid move, but it can hurt the cardholder in the long run. When one reaches the credit card limit multiple times, it can lower their credit score. This is because maxing out the card indicates that the cardholder is majorly dependent on credit for handling their expenses. In this scenario, a potential solution for those who can consistently pay their bills on time without any difficulties is to request the card issuer to increase their credit limit. However, one must only make this request if their monthly expenditures do align with their credit limit. If not, one can reduce the usage of their credit card to avoid maxing it out.

7. Closing old credit card accounts
Coming across a new credit card with better rewards may tempt one to close their existing credit card account before opening a new one. However, doing so would be a mistake. This is because a substantial portion of the credit score depends on the average length of credit history. The longer the average length, the more favorable the impact on the credit score. For instance, if one has two credit card accounts, one aged at 5 years and the other at 2 years, the average credit history is 3.5 years. However, if they decide to close the 5-year-old account, the average age drops to a mere 2 years with the corresponding account being active. So, it is advisable not to close credit card accounts, particularly the older ones, in order to maintain a higher credit score.

8. Applying for too many cards too quickly
While it is normal to have multiple credit cards, it is not advisable to apply for too many credit cards in a short span of time. Doing so creates multiple credit inquiries in that brief period, which can lead to a substantial reduction in the credit score. It is, therefore, better to apply for credit cards thoughtfully, maintaining a minimum gap of at least six months between each application.