2024 brings with it a number of challenges. Credit card interest rates have reached an all-time high, with the average credit card APR hovering above 20%. On top of that, the cumulative amount of American credit card debt has recently hit $1.13 trillion. Not to mention the increased cost of necessities like groceries and other goods.
With all of these factors in mind, it’s more important than ever to be intentional with your financial tools, especially credit cards. That means avoiding these common credit card mistakes in 2024 to ensure you can reach your financial goals.
Paying your credit card bill late
Missing a payment or making a late payment on a credit card is the biggest credit mistake you can make. Your payment history makes up 35% of your FICO score, meaning that late payments can ding your credit in a major way. Not only that, but late payments can lead to late fees and being charged a much higher penalty interest rate on your remaining balance.
Carrying a balance will also raise your credit utilization rate, another major factor that goes into calculating your credit score.
Also, late payments can stay on your credit reports for up to seven years, so the impact on your credit can be long-lasting. The consequences become even worse the longer you go without paying, with your debt eventually entering delinquency and moving to a collection agency.
The best way to avoid late payments is to set a monthly reminder to pay your bill, and at least make the minimum payment. Most credit card companies will also let you set up monthly auto-payments, so you won’t skip a beat. If you’re worried you may not have enough each month to cover an auto-payment, remember you can always set it to pay out the minimum, the full balance or a specified amount.
The credit bureau Experian notes that some credit card issuers may provide a short grace period for late payments, while others will mark your payment late as soon as you miss your due date.
If you do pay your credit card bill on time regularly and accidentally miss one payment, call your bank as soon as possible to see if it will waive the fee, provided you pay in full at the time of your call. Your bank might refund your late fee and interest, but it isn’t required to do anything.
While some credit card companies may mark your payment late after one day, those late payments are not reported to credit bureaus for 30 days, according to credit reporting company Equifax, If you act quickly to change your issuer’s decision to mark your payment late, you could avoid damaging your credit score. If you’re unable to pay your bill, you can also ask your issuer if it can create a payment plan for you.
Maxing out your credit cards
After payment history, the second biggest factor in determining your credit score is the percentage of available credit you’re using. Referred to as “credit utilization ratio,” this factor is calculated by dividing the amount you currently owe by your total credit limit, or your maximum borrowing potential.
You usually want to keep your credit utilization ratio under 30% for a good credit score, though keeping it lower is better. A good rule of thumb is to use 10% of your total credit limit and pay it off each month so you’re not carrying a balance. For example, if your credit limit is $5,000, you wouldn’t want to borrow more than $1,500 and ideally $500 or less.
If you find your credit card limit is too low -- for example, the amount you want to charge to your card exceeds the total you can charge on a given card -- you can ask your credit card issuer for an increase.
Maxing out credit cards could also cost you big money if you can’t pay off the total by the payment deadline. After all, the amount of interest you’re charged in a billing period is based on your interest rate and the amount of debt you carry from one month to the next.
Carrying a high credit card balance
Speaking of, carrying a ton of debt on a credit card is usually a bad idea -- especially considering the average credit card APR is over 20%. There are some exceptions, including if you are using a credit card with an introductory 0% APR for a limited time for a planned purchase.
Carrying considerable debt on a card with the average credit card APR (or a higher APR) can be a costly experience that could leave you struggling for years.
For example, imagine you owe $5,000 on a credit card with an interest rate of 20%. If you paid just $133 per month toward this balance, it would take you 5 years to become debt-free. Over that timeline, you would wind up paying $2,925.74 in credit card interest on top of your original balance.
It’s best to pay off any purchases you make right away in order to avoid getting into a situation like the one above. Or, if you do land in credit card debt, you could use a balance transfer credit card to avoid interest charges for a time as you work to pay down the balance.
Making only the minimum payment on your credit card
Your minimum payment is the lowest amount that your credit card issuer will allow you to pay toward your credit card bill for any given month -- for example, $35. The minimum monthly payment is determined by the balance on your credit card (what you owe at the end of the pay period) and your interest rate. It’s generally calculated as either 2% to 4% of your balance, a flat fee or the higher amount between the two.
Although making minimum payments on time is still far better than paying late or ignoring your bill, paying only the minimum can cause interest to build, making it much more difficult to pay off your balance completely.
If you have a $2,000 balance with a minimum payment of $50 on a credit card with an APRof 21.47%, it will take 5 years and 11 months (or almost six years) to pay off your debt, and you’ll end up paying a total of $1,545.86 in interest. However, if you make a plan to pay the balance off in a year, your payments would be $186.68, and you’d only pay $240.15 in interest.
Here’s an example of how making more than minimum payments can save you significant money in interest.
How minimum payments lead to higher interest
| Credit card balance | Annual percentage rate | Monthly payment | Time needed to pay the balance | Additional interest paid |
| $2,000 | 21.47% | $50 | 5 years, 11 months | $1,545.86 |
| $2,000 | 21.47% | $180 | 1 year, 1 month | $249.71 |
| $2,000 | 25% | $50 | 7 years, 3 months | $2,344.86 |
| $2,000 | 25% | $180 | 1 year, 1 month | $298.45 |
The best way to avoid paying any interest at all on your credit cards is to pay off your full balance each month. If you can’t do that, you might want to reevaluate your regular spending habits to figure out why you’re spending more than you have in cash in the bank each month. While you work on decreasing your spending, consider making purchases with cash or a debit card instead.
Taking out a cash advance on your credit card
Cash advances are a method of borrowing money from your credit line to put cash in your pocket. But using your credit card for a cash advance is a big mistake, according to Katie Bossler, a quality assurance specialist at GreenPath Financial Wellness.
“It’s the most expensive way to pay for things,” Bossler said. “This is not the way to go.”
Convenient as it may be, a cash advance uses an interest rate that is typically significantly higher than your standard APR. Most cards will also include a transaction fee of 3% to 5%. Beyond that, there’s no grace period for cash advances, so you’re charged interest from day one.
If you receive a convenience check in the mail from a credit card company, be careful. It could be a cash advance offer that’s best tossed in the recycle bin. If you need some extra cash, it might be better to think about starting a side hustle or taking out a personal loan with a lower interest rate.
Budgeting apps can also help track your spending, so you can pull back on expenses that can wait.
Chasing credit card rewards without a plan
If you’re considering opening a new credit card account to get money back on your purchases, you can best manage rewards by considering your lifestyle. Heavy travelers should look for a card with frequent flyer rewards. If you spend a lot of money on groceries or drive your car often, look for cash-back rewards for spending at gas stations and grocery stores.
Many cards offer a welcome bonus -- extra rewards for spending a certain amount on your new card within a given timeframe -- to tempt you into spending more than you can afford. These bonuses can help you boost your rewards haul over the course of a given year, but pursuing them only makes sense if you can charge enough in regular purchases to a card.
Regardless, you shouldn’t make spending decisions based on receiving rewards. Credit cards with lucrative rewards typically also charge higher annual fees. In some cases,, even up to $695 per year. However, they often include things like annual travel credits that effectively help lower the cost of the card, so long as you can use them each year they’re available. You might consider a card with no annual fee if you’re not spending enough or getting enough value from a card’s perks to earn that annual cost back.
Since credit card interest rates are so high, that’s another reason to avoid making purchases just for the sake of earning rewards If you ever carry a balance on your card from a purchase you can’t afford to pay off right away, the interest you pay could wipe out any value from the rewards you earned in a short amount of time.
Using credit cards for rewards while ignoring growing interest on your balance is a common mistake that Thomas Nitzsche, senior director of Media and Brand at Money Management International, often sees. If you’re chasing rewards at the expense of your budget, consider coming up with a plan to pay your balance down instead.
Not paying off big purchases during a 0% APR period
Whether you just opened a 0% APR credit card -- which offers interest-free debt for a specific promotional period -- or a balance transfer card -- a credit card designed to accept debt from other cards -- make sure you read the fine print.
Typically, there’s a fee to transfer your existing balance, commonly 3% or 5% of the balances transferred. Also, the introductory 0% rate only lasts for so long, typically between six and 21 months. That means you’ve got a limited time to pay off your balance before a higher APR kicks in.
To create a simple repayment plan, take the amount you owe and divide it by the number of months in your 0% APR promo period. Then pay that amount monthly to completely pay off your balance while you are borrowing without interest. For example, buying a $300 TV using a credit card with an intro 0% APR for six months, making $50 monthly payments will eliminate your debt before the no-interest period expires.
Using a 0% intro APR credit card can be a good strategy to pay off your debt or finance a large purchase, but it can be risky, too.
While disciplined borrowers can effectively roll balances into new accounts with 0% intro APR, Nitzsche says that many people who transfer their credit card balances only make minimum payments, which can result in spiraling debt and damaged credit, leading to a point when they can no longer get approval for new accounts.
Canceling your credit cards
Even if you have paid down your balance on a credit card, there are two big reasons why you shouldn’t cancel your account. Closing your account would affect your length of credit history and your credit utilization ratio, two important components of your credit score. (Remember, your credit utilization ratio is the percentage of your total available credit lines across all cards you’re using.)
If you close an account you’re not using, your total available credit line shrinks, making your credit utilization ratio higher if you have debt.
Canceling older credit cards will also shorten your credit history, leading to a significant drop in your credit score. If you do decide to cancel some of your credit cards, it’s best to leave the oldest account open, as well as the one with the highest credit limit to maintain your credit utilization ratio and prevent any damage to your credit score.
It’s important to note that with inactivity, credit card issuers may automatically close your account. To avoid this, Nitzsche said it’s best to use each of your credit cards once in a while for small purchases.
Not checking your billing statements regularly
How often do you check your monthly billing statement? It can be an eye opener to see how much money you really charge your credit card, especially if it’s routinely more than you bring home each month.
Spending $20 here and there may not seem huge, but it can add up quickly. Remember that increasing your credit utilization ratio will lower your credit score and high balances will cost you more in interest. Plus, how do you know how much you’ve charged if you aren’t tracking your spending?
Tracking your credit card spending isn’t the only reason to check your billing statement. You should thoroughly comb through your transactions to make sure there aren’t any potentially fraudulent charges. The sooner you discover you’re a victim of identity theft, the sooner you can contact your card issuer to dispute the charges and take the necessary steps to secure your credit card account.
For more tips on using credit cards wisely, learn six ways to get the most from your credit card and how to pick the right credit card.
The bottom line
How you use your credit card will determine whether it’s a boon for your finances or a costly mistake. For the most part, you can use credit wisely by using your cards only for planned purchases and paying your balances in full each month.
If you are worried credit cards will lead you into a debt spiral that’s difficult to escape from, you may want to avoid using plastic altogether. This can mean missing out on credit card rewards and perks, but it also means avoiding credit card debt and the challenges it can cause.
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