Are You Making These Top 3 Credit Card Mistakes?


Bad credit score? You’re not alone, especially if you’re under 30–according to a new study by Nerd Wallet, millennials have the lowest average credit score of any age demographic. If you want to boost your credit score, or just stop hemorrhaging funds in interest and late payments, watch out for these three common mistakes.


  • Avoiding Credit

There’s a big difference between credit card debt and healthy credit. When people talk about “building your credit,” they mean maintaining a moderate balance on which you make regular payments over a long period of time. This demonstrates that you are good at handling credit and repaying loans. Many millennials are fearful of credit cards and accruing debt, and though this is a healthy instinct they’re approaching it the wrong way. Seven out of ten millennials would prefer to use a debit card to a credit card, and 63 percent of adults ages 18-29 don’t even have a credit card. Our advice: get one, use it modestly, pay it on time, and watch your credit score climb. You’ll be glad you did when you try to get a loan someday!


  • Making Only the MInimum Payment

The minimum payment should be considered exactly that–the absolute minimum amount you can put in every month. If you’re able, you should absolutely be paying more than your minimum, not only because it will help you stay on top of your purchases but also because you won’t be paying the high interest rates on top of your original purchases. The current average national interest rate for credit cards is 14.95 percent, and most cards for which millennials with low scores qualify are much higher than that. This means that for every $100 you keep on your card, you’re accruing about another $14 each month in owed interest. Bottom line: pay off as much of your balance as you can afford, because you’ll be paying interest on any money that’s outstanding. Another tip: we recommend using Bankrate’s helpful online calculator to determine how long it will take to pay off your debt.


  • Ignoring Automatic Payments

There are two ways to ignore automated payments, and both are equally disastrous for your credit score and bank account. Firstly, you can ignore the possibility of setting up automatic payments and saving yourself a monthly headache. Remembering to pay your credit card on time every month can be an impossibly slippery task for some people, but if you arrange for an automatic payment from your debit card to your credit card, you’ll never risk those late fees. However, you can also make the mistake of setting up automatic payments and then ignoring your balances–if you run a very close monthly budget, your automatic payment might result in overdrafting your debit account, which means overdraft fees. Our advice is to automate your credit card statements, make sure you have overdraft protection from your bank (likely from another line of credit tied to your account), and keep an eye on your accounts if you’re on a tight budget!


For more advice on finances, check our Earn It Use It e-books, designed to help millennials manage their money, stay out of debt, and (most importantly) achieve financial independence through growing their savings! Reach out to us with any questions, or download our free introductory e-book!


E. Scott Erickson’s vision is to empower Americans through financial education. For the last 30 years, he has been a successful financial advisor and avid public speaker in the Pacific Northwest.

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