Eight Unhealthy Credit Card Habits to Kick Now

By Joseph Muscente 

The following is a contributed article from LendingTree and does not reflect the opinion of Service Credit Union.

You’ve probably known people for whom credit cards were the root cause of financial stress, a declining credit score and lifelong struggles with debt. But when used correctly, credit cards can be a very effective tool for managing your finances. 

The key for making credit cards a positive component of your financial life is to avoid some common, costly credit card missteps. Here are eight unhealthy credit habits to stop doing ASAP.

Not having a payback plan

Making purchases without a game plan (aka, a budget) is often how people end up in debt. Keep track of your spending and be mindful that any balance you carry over will cost you much more in interest, especially if it takes you a significant amount of time to pay it off.

Making minimum payments

While it might seem great that the minimum payment due is usually about 1% of your full balance, it’s actually a bad idea to only pay that amount. That’s because as interest continues to accrue, it will take you a long time to make progress on the principal, thus costing you more over time and keeping you in debt longer.

Tip: Take a look at that little box on your credit statement that shows the financial cost of different payoff scenarios.

Missing payments

You may feel like being late a couple of times is no big deal, but there are actually some big consequences going on behind the scenes. For starters, you’ll pay a late fee, which can be up to $30 for a first offense and up to $41 thereafter. But your credit score will also take a big hit once you’re 30 days past due. At 35%, payment history is the largest factor impacting your score, and late or missed payments can stay on your credit history for up to seven years.

Carrying a high balance

You may think if you make on-time payments every month, your credit is in great shape, but your balance matters a lot, too. Having a high credit utilization (or the amount of available credit being used) can have a negative impact on your credit score. In fact, it accounts for about 30% of your credit score. So if you have a $1,000 credit limit and a $750 balance, that means you’re utilizing 75% of your available credit. Experts recommend aiming to keep your utilization below 30% and as close to 0% as possible to maximize your score and avoid high interest rates and unfavorable lending terms.

Not looking over your credit statement

With online accounts and digital apps making it easy to set up one-click payments, you might not spend time looking over your monthly statement, but that can be a mistake. For one thing, you may miss fraudulent activity — something that 65% of credit and debit users in a 2023 survey say they have experienced. Looking at your statement can also provide a gut check to see where your hard-earned dollars are going, such as on recurring subscriptions that you may no longer be using.

Opening too many cards

Especially when you first start receiving credit card offers, you may be inclined to sign up for a few of them. While it’s OK to end up with several credit cards over time, you should space out your applications so that you’re only seeking new credit when you really need it. That’s because if you seek out too much credit in a short period of time, it can serve as a red flag to future lenders — and credit score algorithms — that you’re having cash flow problems. Plus, with more credit cards in your wallet, you may be tempted to overspend and then juggle multiple bills each month.

Not being strategic with your cards

Paying attention to all of the features on your cards is the best way to make sure you’re taking full advantage of any rewards or benefits they offer. For example, if you’re traveling abroad, you should see which of your cards has no foreign transaction fee, as well as features such as travel assistance services. Consider how you spend and what type of points structure makes sense for you as well.

Closing old cards

The age of your oldest credit line is a component of your credit score because lenders like to see a long track record of financial experience. So while you don’t have to necessarily use your older cards, taking the step of closing down cards can shorten your history. It also reduces your total available credit, which in turn will impact your credit utilization.

Kicking these bad credit habits out of your life and replacing them with good ones — paying on time, monitoring accounts, taking advantage of rewards, being mindful of spending — will pay dividends. Not only will you avoid debt and the grief that comes with it, but by improving your credit score, you unlock access to better products and lower your cost of borrowing.