Four credit card mistakes that could cost you $100s this year
CREDIT cards have become nearly as universal as cash.
More than 70 percent of Americans own a credit card, while a third of people have three or more cards.
Behind debit cards, credit cards are Americans' second favorite spending tool, with nearly a quarter saying they prefer using them over anything else, according to Finder.
While credit cards are convenient, they also make it much easier for consumers to build up debt.
More than 50% of Americans have at least $1,000 in credit card debt, according to a survey from GoBankingRates, and 15% owe upwards of $10,000.
Keeping a budget and avoiding overspending can prevent you from accumulating credit card debt, but the following mistakes can cost you hundreds and even cause outstanding debt to grow.
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1. Missing payments
Failing to make a credit card payment will typically hurt you in two ways.
First, you'll likely be hit with a late fee, which costs more than $34 on average according to the Consumer Finance Protection Bureau.
Missing payments can also impact your credit score, which has broad repercussions on your ability to borrow money and make big purchases.
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Even if you can only make the minimum payment, you should do what you can to pay on time by setting up reminders or using autopay.
2. Only paying your monthly minimum
While paying the monthly minimum is better than missing a payment altogether, it's still not ideal.
Credit card companies often set low standards for monthly minimums, with 2% of your total balance as a common sticking point.
Depending on how much you're changing to your card, only meeting the monthly minimum will allow interest to build up on your debt.
Credit card debt comes with an average interest rate of 20.7%, according to LendingTree, although rates vary by credit score.
Say you had a $5,000 credit card balance, and a monthly minimum payment of $100 that you always made with a 20% APR.
According to Discover's interest calculator, it would take you nearly nine years to pay down that balance, and you'd pay off an additional $5,503 from interest along the way.
3. Maxing out your card
Like how credit card companies typically set very low monthly minimum payments, they often offer high credit maximums.
While having a steep credit limit can be useful if plan to make a big-ticket purchase with credit, you should avoid spending up to your monthly max as often as you can.
Not only can this be difficult to repay over time, but you may also find yourself with a damaged credit score.
In fact, using more than 30% of your available credit can reduce your score.
This is because your credit utilization ratio is one of the key factors that credit reporting agencies and lenders look at.
A utilization rate shows the percentage of the credit limit you use and is typically what's used by lenders to measure your risk.
To avoid the mistake, cap the amount you spend on your credit card and stay well below the 30% threshold.
In addition, spending up to your limit puts you at risk of going over, which can come with an average $35 fee, according to CNBC.
4. Ignoring your statement
If you use a mobile banking app or otherwise have easy access to keeping tabs on your account, its easy to dismiss your monthly statement.
However, checking your statement regularly has benefits, not least of which is that you can use your spending to help plan future budgets.
With all your monthly charges compiled in one place, you can see exactly how and where you use your credit card, and alter your habits accordingly.
In addition, periodically checking your statement is the best way to spot errors or fraudulent charges that may be costing you money you didn't realize you lost.
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This credit expert offers seven tips to boost your credit score.
The Sun also explains how to fix errors on your credit report.