Credit cards are the easiest way to build your credit history, but only if you use them responsibly. When used incorrectly, they can damage your credit. Damaged credit implies that you have problems managing your finances, which can have several significant consequences. It will make it more difficult or even impossible to get a mortgage or borrow money for any other purpose. Lenders are reluctant to loan money to individuals with a bad history of money management. Even if you do manage to get approved for a loan, it will almost certainly be at a much higher interest rate.

Credit card mistakes can also cost you a lot of money by way of hefty penalties. This will only send you deeper into debt, which will plunge your credit score even lower. The best way to avoid this scenario is to be disciplined with using your credit card from the outset. This starts with being aware of potential credit card mistakes and how to avoid them.

Below, we break down some of the more common mistakes people make with credit cards.

#1 – Treating Your Credit Card Like A Debit Card

You can use your credit card to pay for most things but not all. Some payments must be made by check or cash, which requires you to have that balance in your bank account. If you fall short, it’s tempting to use your credit card to get a cash advance. However, while that may resolve your short-term dilemma, it is a risky thing to do.

When you take a cash advance using your credit card, there’s no grace period like there is with regular purchases. Interest starts accruing on the amount you withdraw from the moment you withdraw it. And it keeps accruing until you pay off the amount. Worse still, you’ll pay a higher interest rate and a cash advance fee. The cash advance fee can be around 5% of the amount you withdraw. All of this adds up, making cash advances an expensive solution and sending you deeper in debt. The longer you take to return the cash advance, the more damage it will do to your credit score,

#2 – Missing Payment Due Dates

Missing payment due dates will cost you big time. It doesn’t matter whether you forgot the due date or you didn’t have the money to make the payment. If the payment is late, the credit card company will charge you late fees. In addition, they will also charge you interest on the outstanding amount. The high fees and interest can cause your debt to spiral sharply and your credit score could take a hit.

There’s absolutely no excuse for missing payment deadlines. If you find it difficult to keep track of the due dates, set up automatic payments through your bank. If you routinely run short of funds, it’s time to take a long hard look at your spending habits and make some changes.

#3 – Making Minimum Payments Only

Making minimum payments can provide temporary relief when you are financially stretched. However, this option comes at a price because you will end up paying more with the interest tacked on. The less you pay by the due date, the more you will have to pay later on. If you regularly make minimum payments only, the interest charges will keep adding up. This will make it even more difficult to pay off your debt, which will result in damaged credit.

Credit card companies offer users the minimum payment facility as a lifeline but that doesn’t mean you should use it carelessly. Try to avoid this option as much as possible. The best option is to pay the full amount before the due date even if it means cutting other things out from your budget. The second-best option is to make the highest payment you can afford. Making minimum payments should be your absolute last option. Having a budget in place can help ensure that you always have sufficient funds to pay off your debt in full every time.

#4 – Signing Up for Too Many Credit Cards

Airline miles, payback rewards, and other exciting perks make it tempting to apply for more credit cards than you need. As long as you don’t use the cards unnecessarily, there’s no problem, right? Wrong.

Having too many credit cards can harm your financial wellbeing. For one thing, the extra credit can trick you into spending more. You are also less likely to track your expenses. Secondly, keeping track of multiple due dates can be challenging. It increases the chances of you missing due dates, leading to serious consequences. That’s not all. Having too many credit cards can jeopardize your credit score right at the outset by appearing as a potential risk to lenders.

Don’t get tempted by perks and rewards. They’re often not worth the high cost you will pay by way of damaged credit. Only get an additional card if you know for sure you can afford to pay it off in full every month.

#5 – Not Reviewing Your Monthly Statements

You must be proactive about reviewing your billing statement every month. That way if there is an error or a suspicious transaction, you can report it right away and get the charges reversed. The longer you wait to report any error or fraud, the more difficult it will be to resolve the problem. Make it a habit to review your monthly statements as soon as you receive them.

Credit cards are a great asset. They allow you to buy whatever you want without carrying cash in your wallet. Best of all, they help to build your credit score. However, credit cards are only an asset when used responsibly. Making credit card mistakes regularly can cause considerable damage to your credit history. You could take months or even years to erase the damage and get your credit history back on track.