6 Credit Card Mistakes That Are Costing You BIG Money (AVOID These Common Mistakes)

finance Aug 16, 2022
6 credit cards mistakes that are costing you BIG money (avoid these at ALL COSTS)

These 6 credit card mistakes are costing you BIG money (Avoid these common mistakes at ALL COST)


Credit Cards can be an incredible tool for building wealth….

Everything from building credit, cash back reward points, and even insurance on purchases

However, if not used properly, they can become a massive liability…. and cost you BIG money.

In this article I want to go over 6 credit card mistakes that you may be making that could be costing you some major money…..

Whether it’s directly costing you, or indirectly costing you (more on that in a bit)




This is a common credit card mistake many beginners make (and even some advanced credit card users)

The reason applying for too many credit cards at once is a mistake is because of how it negatively affects your credit score (which in turn could cost you $10K’s to $100K’s over your life).

Every time you apply for a credit card, it's considered a hard inquiry on your credit report, and this can affect your score by 5 points.

While one inquiry won’t do much to your credit, having multiple inquiries can add up quickly.

When it comes to your credit score, a hard inquiry counts as “new credit” and is 10% of your overall credit score.

As a general rule, you should only apply for credit cards once every 90 days up to 6 months  (especially if you don’t have great credit to begin with).

This give enough time for your credit to recover from the inquiry


With lots of different bonus incentives, reward points, travel points, hotel points, gas points, etc it's easy to want to take advantage of the best credit card signup offers.

While this CAN be played out advantageously, it can also HURT you as getting the wrong cards at the wrong time can be costly.

What I mean by getting the “wrong” credit card is not understanding HOW you will most use your credit card.

This common mistake happens when someone doesn’t understand what incentives/ rewards they will utilize the most

Not knowing they end up getting a credit card that isn’t best suited for them (perhaps it had a good offer for one time purchase they were making at the time)

Overall it’s important to look at HOW you spend your money and what you would benefit the most from.

If you are new to credit cards, my suggestion is to start with a good beginner foundational credit card that has no annual fee

Then you can build your wallet out from there.




Credit Utilization = what percentage of your total credit are you using

For example, if you credit card has a $5,000 limit and you are using $500 of it, that is a 10% utilization rate

$500/$5,000 = 0.1 *100 = 10%

Credit utilization accounts for 30% of your overall credit score.

It's recommended to keep credit utilization under 30% to maintain good credit.

NOTE: The average credit utilization for those with an 800 credit score and above is 11%.


Paying off a credit card can be an incredible feeling (especially if you’ve been trying to pay it off for a while)

With the great feeling comes the natural thought to close out the account so you can’t spend money on it again

For some, this may actually be a good idea (if you have absolutely no self control)

For most, closing the credit card you just paid off or don’t use, is actually hurting you.

That’s because closing out credit cards hurt your credit history, which accounts for 15% of your overall credit score.

Instead of closing your credit cards, be sure to make a really small purchase each month (that you were already going to buy) and pay it off each month.

This way you can maintain longer credit history amongst your cards

This is turn will help increase your credit score which will give you access to the best loans and rates possible.


It has been proven time and time again in scientific studies...

When people use credit cards, they spend more money.

That is because credit cards activate the reward centers in our brain sending lots of feel good chemicals (which in turn makes us want to spend more)

MIT did a very in depth study on how credit card spending activates the reward centers of our brain and you can read about it here

Dun & Bradstreet found that People spend on average 12-18% more when using a credit than when using cash.

The best thing to do is always use cash or your debit card when making purchases.

IF you want to take advantage of credit card points…

  • Always make sure you have the cash to pay for it at the time
  • Pay off your credit card the next day (treating like a debit card)
  • If the purchase is over 1% of your annual income wait at least 48 hours before making the purchase, 48 hour rule.


This mistake will absolutely cost you A LOT of money over the course of your life.

When you have a lot of payments, and are having a hard time keeping up with them, it’s easy to just make the minimum payments.

The problem with this is making minimum payments usually only pays off the interest owed and doesn’t contribute the the principal (and some times your payment doesn’t even cover your interest accrued)

Here's how to calculate interest payment on your credit card.

Let’s say you have a $10K balance on your credit that is being charged at 21% APR

STEP 1: Divide you annual percentage by 12 months to get your monthly interest charged

21% / 12 = 1.75% monthly interest

STEP 2: Multiply your total debt owed by your monthly interest

$10,000 X 1.75 = $175 per month in interest

That means that unless you are paying AT LEAST $175 per month you aren’t even covering your total interest....

Which in turn means you will owe even more next month....

....and even more the following month.

IF you want to pay down your debts you’ll need to pay at least the interest payment plus additional payments

If you are struggling to get your debts paid down each month, my suggestion is to start by visiting your budget

I have some great videos and articles talking about “How To Budget Money The Right Way (And Retire In Less Than 10 Years Using the 50/30/20 Rule”

This is will help you start to pay down your debts and work towards the next phase which is investing

Also, use techniques like debt snowball or avalanche techniques to payoff your credit cards faster

IF you enjoyed this content, make sure to subscribe to my youtube channel. Each week I post videos on how to go from where you are to where you want to be financially - personal finance, entrepreneurship, income magnification, investing, passive income, and wealth building.

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