5 Credit Card Mistakes to Avoid

Be a smarter shopper and learn easy ways to avoid these plastic traps with these top credit card tips.

By Cari Wira Dineen

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Avoiding the Tricky Pitfalls

You know the worst plastic perils—charging more than your credit limit, not paying your bills on time, and taking out costly cash advances—but there are other hidden things that can get you into trouble, too. “Even if you’ve been a credit card customer for years, you still want to make sure that your credit card is working for you—not against you,” says Janna Herron, credit card analyst at Bankrate.com.

Read on to discover credit card mistakes that you might be making and how to fix ‘em>>

#1: Opening store credit cards to get a discount.

No doubt you’ve been in this all-too-familiar scene at a store: You’re ready to pay for your purchases when the store clerk offers you a discount—if you open a store credit card. Tempting as it may be to get that 20 percent off, don’t do it.

“When a credit card lender checks your credit history in order to approve you for a new card, it’s going to affect your credit score negatively, because you are applying for more credit,” says Herron. Put another way: You don't want to have too many credit cards. Furthermore, most of these specialty store cards come with low credit limits and high interest rates. “So unless you pay off your balance in full, the discount is gone with the interest you incur,” says Herron.

Finally, if you don’t use the card after the initial purchase, you run the risk of the lender closing the account—which can further hurt your credit score.

#2: Not shopping around for the best card.

If you have established credit, chances are you get a lot of credit card offers in the mail. And they’re tempting—with automatic rewards such as 25,000 points just for signing up. But don’t just respond to the credit card offers you get in the mail, cautions Herron. "Often, introductory rewards are tied to minimum purchase requirements, such as charging $3,000 in the first three months," says Herron.

And that might not be the best deal out there—just the only one you were made aware of. “There might be a better card with lower interest rates or more appealing rewards." So before you jump at the first offer that hits your mailbox, research the other cards you might qualify for at Credit.com or Bankrate.com.

If you're sick of receiving credit card offers in the mail, go to www.optoutprescreen.com to opt out from receiving the offers for 5 years. (To opt out permanently, you’ll have to mail in a form.)

#3: Not utilizing a rewards program.

“If you pay off your balance each month, you should be making the most of your rewards program,” says Herron. “The points can really add up, especially if utilize the shopping portal or special promotions.”

She suggests looking into a card that rewards your grandchildren—perhaps a Disney card for to build points for a future trip, or a UPromise card to help contribute to your grandkids' college fund. And pay attention to annual fees to participate. “Be sure the value of the reward surpasses the annual fee every year,” says Herron. You can compare rewards credit cards on either Credit.com or Bankrate.com.

#4: Not tracking your charges.

As soon as you receive your monthly credit card bill, be sure to look it over. You'd be surprised how many people don't. Errors, such as double-billing, happen. And unfamiliar charges could signal identity theft, says Herron. As soon as you see a mistake, call your lender to rectify the discrepancies. If you believe the charges are fraudulent, contact the three credit reporting agencies (Transunion, Experian, and Equifax) to put a fraud alert on your account for 90 days.

Reading your bill can also tell you the terms of your credit card—such as the interest rate, the grace period, and other fees. "These terms do change, so be sure to read the fine print," says Herron.

#5: Sharing your credit card with children or grandchildren.

It may seem like a good idea to lend your loved ones a hand with their expenses or to help build (or rebuild) their credit by adding them to your credit card account. But you may be in for a big surprise (and a big bill) if they don’t use the card responsibly. “If you have good credit, having a child or grandchild on your account actually helps their credit,” says Herron. But likewise, if they screw up, it can also hurt your credit.

Still, if you can’t help but help out your family, Herron cautions against making them joint card holders. Instead, make them an "authorized user" on the account. “This way, you have more control and can remove them from the account if they spend irresponsibly.