9 Bad Credit Card Habits That Stall Credit Recovery

You might be someone who's just beginning their credit journey, or perhaps you're trying to recover from poor credit. When it comes to credit, there are a few mistakes first-time credit card users and long-time users often make. Your credit card is one of the best tools you have to build your score, so the sooner you can avoid the pitfalls, the sooner you'll start to experience credit success.

Getting yourself a credit card always seems to feel a little bittersweet. It’s nice to be approved to borrow money and it’s really nice to have new spending power, but there’s always that threat of growing debt looming over your head. If you’ve gotten into trouble with your credit card lately, there are still credit recovery programs that can help you get on the right track.

It’s easy to get sucked into bad habits when it comes to our credit cards and these bad habits are the surest way to find out what the cons to having a credit card are. If you avoid these bad habits, though, your credit card is going to work for you and continue to improve your credit score.

So, what are the bad habits we should avoid? Let’s take a look:

1. Not looking at credit card statements

This is the meat and potatoes of keeping your debt under control. You have to get a good understand of where you’re spending your credit, how much you’re spending and see that it adds up, especially when you take into consideration the interest you pay on your balance.

Looking at your statements at least every month, really looking at them, is going to paint a picture for you. You’ll slowing see ways to keep your spending under control emerge the more you pay attention. You’re also going to catch any suspicious charges when and if they occur. Don’t get caught up in the bad habit of ignoring your statements, or worse, avoiding them because you’re afraid of what you might see.  Always check your statements.

2. Losing track of your balance

In between checking your statement, check your credit card balance weekly at the very least. It’s really easy to ignore while you’re spending small amounts here and there. The problem though, is that if you ignore your day-to-day credit card balances, it could creep up on your faster than you can afford. Stay on top of it and avoid spending outside of your means.

3. Paying only the minimum balance

If you want to see your credit card work for your credit recovery, you’re going to need to bring your balance down. You’re also going to want to avoid paying as much interest as possible - the best way to do both of these things is to pay down your credit card as fast as you can. Paying off your entire balance in full every month is going to be the absolute fastest way to a great credit score, but paying whatever you can beyond your minimum payment reduces the amount of interest you end up paying, thus, reducing the cost of your credit card, and it also boosts your credit score.

4. Making late payments/missing payments

It can be risky when you introduce a new monthly payment into your budget. If it slips your mind, even a single late payment can negatively impact your credit score. Make sure you don't accomplish the opposite of what you set out to do! You want your new credit card to build your score, not hurt it. Late payments show up as a derogatory remark on your credit report and can bring your score down by several points. It can be hard to secure future financing if you have derogatory remarks showing on your credit report. Set a reminder if you have to, but get your payments made on time, without fail.

It's no surprise that when you miss a payment deadline, it will have negative implications on your credit score. If you miss too many payments, your debt will get sent to collections which will hurt your credit score tremendously. Avoid this common pitfall by carefully monitoring how much you are spending, and always paying your balance off in full every month

5. Using cash advances

If your credit card gives you access to cash advances, it allows you to withdraw money from ATMs from your available credit. However, you have to be aware that they come with a much higher interest rate than any of your normal credit spending in the same card and there is no grace period. With your other purchases on your credit card, you have a good month before interest is charged - more than enough time to pay what you’ve spent off and not incur any interest charges. With cash advances though, the interest is charged immediately so you can’t really avoid it. This interest will accumulate and before you know it, that one cash advance is the reason you can’t seem to get your card paid down. Our suggestion? Don't use this feature at all. Even if your card has a great interest rate, on cash advances, I can assure you, it does not.

6. Applying for unnecessary new credit cards

While it is true that obtaining a new credit card can improve your credit usage percentage, you don’t want to get credit cards if you’re planning on spending with them. You should only have precisely the number of credit cards that you, personally, can handle without getting yourself into debt. This is going to require you to really know yourself, especially your bad habits.

Applying for too much credit in a short period of time can also raise red flags at the credit bureaus and bring your score down. Check out our previous blog post “How Many Credit Cards Are Too Many?”

7. Maxing out your credit card

When you max out your credit card, it reports negatively to the credit bureau. It's easy to get carried away with your new spending tool, but be careful not to dig yourself into debt. Using your credit card beyond what you can afford is the number one way Canadians stumble into debt they struggle to get out of. Exercise some self-control and keep your credit card spending to only the essentials.  Credit card debt is common and hard to recover from due to the high-interest credit card companies charge. Practice discipline and if you feel you can’t quite trust yourself, leave the credit cards at home when you’re heading out to shop.

8. Letting your cards go dormant

It’s easy to stay out of debt if you don’t use your credit cards at all, right? Yes, but it’s also really easy to have your credit score stall or even disappear from lack of use of credit. In order to have your credit cards work for you and increase your credit score, you need to use them and pay them off on time.

9. Too many impulse buys

Instead of buying things you don’t need, learn to set yourself a budget and stick to it. It’s not easy, but the alternative is a lot harder. Avoid burying yourself in debt with impulse buys and control your spending.

Start your credit recovery process today!

Avoiding these bad habits is a good start to your credit recovery, but you should also consider credit counseling or credit rebuilding programs if you really struggle with this. Check out Refresh Financial’s credit recovery program and get your credit on track, now. Apply Now!

Can you think of other bad habits when it comes to credit cards? Let us know in the comments!