Credit cards are a powerful and convenient financial tool.

When used wisely, they can help you manage your finances, cover major or unexpected expenses, build a strong credit history, and even offer rewards like cashback.

However, if not handled properly, credit cards can lead to costly mistakes that can damage your credit score and impact your financial health. Let’s dive into 7 common credit card mistakes you should avoid!

1. Missing Payment Deadlines

The most serious mistake you can make is failing to pay on time. Late payments can have a long-lasting impact on your credit report, affecting your ability to get approved for loans or other credit cards in the future. You’ll also face late fees and accumulate interest on your balance for a longer period. Make timely payments a priority to protect your credit history.

2. Only Paying the Minimum

Paying only the minimum balance each month means you'll end up paying far more than the original amount you charged. For instance, if you charge a 100 JOD dinner and only pay the minimum, you could end up paying much more due to interest charges. If you can't pay off the full balance, aim to pay as much as possible over the minimum to avoid interest piling up.

3. Ignoring Your Statements

Review your credit card statement regularly to catch any errors or fraudulent transactions. Delaying this review could result in unreported fraud, leaving you responsible for charges you didn’t make. Checking your statement monthly allows you to spot unfamiliar transactions and take swift action.

4. Maxing Out Your Credit Limit

Maxing out your credit card limit is a risky move. It increases your credit utilization rate, which can damage your credit score and make you seem less reliable to your bank. Ideally, aim to use no more than 30% of your credit limit. For example, with a 2,000 JOD limit, keep your balance under 600 JOD to maintain a healthy credit score and financial relationship.

5. Withdrawing Cash

Withdrawing cash using your credit card can be a costly mistake. Cash advances often come with higher interest rates than regular purchases, and the interest begins accumulating immediately. Unless it's an emergency, it’s best to avoid using your credit card for cash withdrawals from ATMs.

6. Overspending for Rewards

Credit card rewards, like cashback, can be enticing, but overspending just to earn them is not worth it. While it’s great to get perks for your regular purchases, spending excessively to rack up rewards can lead to accumulating debt. It's essential to be mindful of your spending habits to avoid putting yourself in a financial bind.

7. Cancelling Credit Cards

Paying off your credit card in full is a major achievement, but one mistake to avoid is cancelling the card afterward. While it might seem like a good idea, cancelling your card can actually hurt your credit score. Cancelling a credit card doesn’t erase your credit history, and depending on how you do it, it could lower your score and make it harder to secure loans or other forms of credit in the future.

The length of your credit history plays a crucial role in your credit score. When you cancel a credit card, especially an older one, you reduce the average age of your credit history, which could negatively affect your score. For example, if you have one card that’s been open for 5 years and another for 2 years, your average credit history length is 3.5 years. But if you cancel the 5-year-old card, that average drops to 2 years.

Unless the card comes with high annual fees, it's generally better to keep it open. This helps maintain a longer credit history, which is beneficial for your overall credit score.

By avoiding these common mistakes, you’ll be able to maximize the benefits of your credit card while protecting your credit score from unnecessary damage and extra costs.