By Hughes Federal Credit Union

Misusing credit cards can be detrimental to your credit score so it’s important to build healthy financial habits to help you avoid the pitfalls of credit and stay out of debt. Here are five common credit card mistakes you should avoid making.

Making minimum payments
Making just the minimum monthly payment will extend the amount of time it’ll take you to pay off the debt. Smaller payments will hardly make a dent towards the principal balance and your total debt will continue to accrue interest. Before swiping your card for a large purchase, devise a plan to help you pay off the debt. You don’t want to make it a habit of carrying a balance month to month.

Making late payments
Your credit score is made up of several factors but the most important component is your payment history. Lenders look at payment history to determine if you’re responsible enough to repay your debts. Missing payments or making late payments can cause some serious damage to your credit score, resulting in you paying more in late fees and interest. If you’re having a difficult time paying your bills on time, try calling your creditors and asking for an extension and set up automatic payments so you won’t forget.

Maxing out your credit limit
While payment history makes up about 35% of your score, your credit utilization ratio is almost just as important representing 30% of the credit score pie. Racking up a balance close to your credit limit is off-putting to lenders who might consider you too reliant on credit and will be hesitant to lend because of the worry that you won’t be able to pay back what you borrowed.

Applying for too many credit cards
When you apply for a credit card, an inquiry shows up on your credit report. If you make too many credit card applications within a short period of time, you’ll see your score take a hit. Attempting to open multiple credit card accounts can appear suspicious to lenders and will most likely lead them to deny your application.

Taking out a cash advance
Unlike standard transactions, cash advances will accrue interest as soon as you’ve borrowed the cash and will come with no grace periods. On top of the convenience and ATM fees, cash advances also come with high-interest rates, making this option a very risky financial move.

From low-interest credit cards to expert financial advice, Hughes can help. If you’re looking to bank at a financial institution where your interests come first, stop by one of our seven branches or apply online at today.

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