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- Your credit card offers the ability to make small payments and take out big wads of cash — but those features come with steep interest fees.
- When you pick up your phone, make sure you're keeping an eye on your translation history and your inbox.
- Not only will this alert you to fraudulent charges, but it will also help you maximize your credit card rewards.
- Closing one of your oldest credit card accounts is also a mistake to avoid — since this can negatively impact your credit score.
- See Business Insider's list of the best credit cards »
The last day of October might have kept you on the lookout for tricks from others, but you should be equally concerned about the kind of foolish mistakes you can make on your own with your credit card on any day of the year.
To make sure you're maximizing the rewards you can rack up while using your credit cards responsibly, avoid these five common mistakes.
1. Paying the minimum balance
Making on-time minimum payments does check off one important box for your credit score — never being late — but otherwise, those minimum payments only maximize how much money you're going to wind up paying your bank.
Let's say you purchase a couch for $1,200, and your monthly minimum payment is $75. With an interest rate of 14.99% and regular minimum payments, it's going to take you 18 months to pay for the comfort of that couch. It's also going to wind up costing you an additional $130. Follow the No. 1 rule for your credit card bill: Pay it in full every month.
2. Taking out cash advances
When you receive a new credit card, you'll notice two numbers on the accompanying paperwork: your credit limit and your cash advance limit. Disregard the cash advance number. Don't even think about it. Cash advances are subjected to extremely high APRs — typically upwards of 24%. Make sure you're building up a savings fund instead. If you somehow wind up in a desperate situation where you need cash, use that money instead. Your credit card should be an absolute last resort.
While many of them might wind up in your trash folder, there can be hidden treasures buried among them, too. For example, Chase just alerted me that my Ultimate Rewards points are worth 25% more when redeeming for Apple products. I also regularly keep an eye on those emails for targeted cash-back offers at certain merchants. As credit card companies work to keep customers happy, many of them will aim to give you a smile in your inbox.
5. Closing an old credit card
Do you still have that first credit card account open from when you graduated college? Even though you may rarely ever use it to pay for anything, that card is playing a pivotal role in your personal finances.
The age of your accounts is an important factor in your credit score. The longer an account is active and in good standing, the better you look in the eyes of other lenders. So keep that card open. Use it occasionally. It might help your credit score look strong enough to apply for your next card, your car loan or your mortgage.
And if you want to cut down on annual fees, remember that you can always downgrade a premium credit card to a cheaper option, so you don't have to close your account.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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