9 Credit Card Mistakes You Need to Avoid

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Credit cards provide great convenience and plenty of solid loyalty point perks, especially when you first sign up for one. But, there are some pitfalls that are important to take note of when your wallet is full of cards. Consider each of these the next time you are looking through your wallet, and don’t make these big mistakes.

Overspending

Perhaps most important of all is the danger of overspending and purchasing things that you don’t have the funds to cover. Sign-up bonuses, especially if you have to meet a certain threshold before earning bonus miles, can be tempting. Credit cards can be dangerous if you carry a balance. Interest charges can quickly pile up, and those extra fees can quickly outweigh the benefits of earning miles and points. If you budget carefully, you can reap plenty of awards without paying extra fees.

Falling for the minimum payment

If you can’t pay the card balance in full, credit cards offer a minimum payment number. It is easy to simply agree to pay that minimum amount, but it is always wise to pay as much of the balance as possible. Remember that interest is charged as a percentage so the smaller the balance, the smaller the interest fees.

Limited card sign-ups

Over the past few years, we have seen credit card companies impose limits to the number of cards you can have from one bank. They can also limit the number of signup bonuses that you receive. For example, Chase only lets you apply for five credit cards within a 24-month period. The 5/24 rule should be carefully monitored; you wouldn’t want to be denied taking advantage of a lucrative sign-up bonus simply because you already have five cards (perhaps with smaller sign-up bonuses) within the two-year period.

Chase 5/24 rule
Because of Chase’s 5/24 rule you will likely be denied for a new card if you have applied for more five in the past two years

Late payments

As a frequent traveler, I am often on the road when my card invoices would arrive. It led to a few late payments, which automatically tacked on a late fee. I was able to call the credit card company to have them waived since I always pay on time, but it is wise to sign up for automated payments so that you don’t have to worry. Like interest fees, you don’t earn bonus miles and points on late payment fees.

Locking yourself into one program

While there are some great airline or hotel-affiliated credit cards, if you only are going to get one card, it pays to sign up for one that has transferable points. This means that instead of earning points in just one program, you earn points with the credit card’s own program that can be transferred to travel partners. This gives you excellent flexibility when it comes to redeeming for your preferred award. Many programs, like Chase Ultimate Rewards or American Express Membership Rewards, even let you redeem points like cash against a travel purchase. This is especially lucrative because even though you redeem credit card points for flights, you can still earn miles with that airline’s frequent flier program.

ATM credit card withdraw
Withdrawing cash from a credit card usually results in high fees

Credit cards are not ATM cards

Some credit cards allow you to take cash out of an ATM or at select retailers, but this is not the same thing as an ATM card. ATM cards may charge a small, flat fee for withdrawing money, but taking a cash advance on a credit card comes with extra fees and interest, which is charged as a percentage of the total.

Forgetting special offers

Many cards come with special offers that are not always widely advertised. American Express cards, for example, have unique Amex Offers that are tied to one’s specific account and generally require members to log in to activate each one. You could be missing out on lots of discounts and cash back by not logging into your account and activating offers for places that you might be frequenting anyway. This month, Delta’s American Express cards are offering two complimentary premium drinks at its Sky Club bars just for having the card. American Express Platinum has a host of nice perks like free access to Centurion lounges in many airports, free Uber credits each month, and $200 in airline travel credits. For the last benefit, travelers must designate their preferred airline each year for the credits to take effect. Cardholders must also request their Priority Pass membership card, which does not ship automatically. Both of these are important considerations that factor into the membership fee, and it would be a disappointment to not take advantage of these bonuses.

Not taking advantage of category spend bonuses

If you have a card that earns bonus points or miles in certain categories, be sure you are using the right card for the right purchases to maximize your earnings. Chase Sapphire Reserve and Chase Sapphire Preferred cards earn triple points on dining and travel spend so be sure to put those purchases on that specific card. The Chase Freedom card has varying category bonuses that earn as much as five points per dollar spent. This can be a lucrative way to stop on miles each quarter, but registration for each promotion is required. Don’t make purchases without registering first!

Missing out on retention bonuses

If you decide to cancel a credit card, don’t act too quickly. Most card companies offer retention bonuses designed to keep you as a customer for longer. The way it works is that you call the card issuer and say that you want to cancel the card; you’ll then be transferred to another person that will try to get you to stay as a customer. Often, they will offer bonus points, waived fees, or other perks to get you to keep the card. This can be a valuable trick that many people may overlook when they think about canceling a card.