13 bad credit habits you need to break now

Bad habits are easy to fall into and nearly impossible to dig yourself out of.

Bad credit habits can destroy your credit score, put you in debt and cause a number of other financial problems that threaten your stability and long-term goals.

But all it really takes to break a habit is some sound advice — and willpower.

If you have the latter, we have the former.

Because you might not even know you have bad credit card habits, we went to the experts for advice on which ones are the most damaging.

Read on to see if any apply to you, then use that willpower to replace those bad habits with good ones.

1. Not paying the minimum

Gerstman Financial Group’s Michael Gerstman is no stranger to consumers who have bad credit habits.

One bad habit he has witnessed is people not paying at least the minimum on their credit card balances each month.

“You should always pay at least the minimum balance,” Gerstman said, “and if possible, the full balance each month.”

He also suggested that if you carry a balance on credit cards, make an effort to pay it off before you use your cards again.

It’s so much easier to make the minimum payment than to figure if and how much extra you can afford to put toward your credit card bill, said Marvin Smith, credit coach at DKR Group and author of “The Psychology of Credit.”

But when you’re paying only the minimum, you’re not making much progress toward paying off your credit card bill. And unless you have a very low balance or a 0% promotional APR, you’re probably paying much more in finance charges than you have to, he added.

Send more than the minimum if you can, or at the very least, pay the amount required to pay off your balance in 36 months, which is also printed on your billing statement, Smith said.

See related:  Will paying down my credit card balance reduce my minimum payment?

2. Carrying a balance to ‘build your credit score’

Riley Adams is a licensed CPA and owner of Young and the Invested, a personal finance website dedicated to helping young professionals find financial independence and explore entrepreneurship.

Adams said she often hears about people carrying monthly balances because they think it will help build their credit scores.

In reality, doing this comes with added interest expense and no real improvement in your credit score, according to Adams.

“Most of the criteria used to determine your credit score comes down to how consistently well you handle credit awarded to you over long periods of time,” Adams said.

3. Paying late

Gerstman said he knows a lot of people pay their credit card bills late.

It is crucial, he said, to pay on time — every time — because late payments will adversely affect your credit score. According to FICO, a late payment can cost you over 100 credit score points.

See related:  What happens when you miss a credit card payment?

4. Shopping to ‘be happy’

Credit coach Marvin Smith said it’s common for people to go on mood-based spending sprees.

“Shopping can actually release endorphins in the brain, similar to other activities such as exercise, sex and even eating chocolate,” he said.

But unfortunately, spending money in order to feel good can become addictive.

And those feel-good purchases you rack up could become hard to pay off — and eventually ding your credit score.

Shopping to boost your mood creates a link between happiness and buying material goods – and it’s a link that can be seriously hard to break.

We all have our creature comforts — those habits that, for better or worse, we indulge on a daily basis, Smith said.

“However, while a regular morning latte or a new pair of shoes might seem harmless, you’ve got to consider their effect on your bottom line,” Smith warned.

See related:  Could your credit card help you control your overspending?

5. Opening and closing multiple cards

Serial acquisition of credit cards can seem like a good idea at first, but it can reflect poorly on your credit score if you close too many of them.

Tanya Peterson, vice president of brand for the site Freedom Debt Relief, said that consumers sometimes cancel accounts on which they’ve developed a positive payment history just to eliminate the temptation to use the card.

Yet, the longer you have a credit card account, the more valuable it is in credit score calculation, she added.

“Store a card away to avoid using it, but think very carefully before actually closing the account,” Peterson said.

Having multiple credit cards that all have good histories can strengthen your credit score, said Igor Mitic, a financial advisor at the online personal finance website Fortunly.

If you apply for a credit card just for the sake of having it, your credit score could take a temporary dip from that hard inquiry, so be prepared.

“It’s better to have a good record on just a few cards than to stack credit cards and not use them,” Mitic said.

See related:  Closed accounts affect your credit score, but maybe not how you think

6. Not keeping your receipts

If you don’t keep your receipts, you can’t compare them with your credit card statements to see if you’ve been charged for something you didn’t buy, said Gladice Gong, personal finance blogger for the website Earn More Live Freely.

“If you have your receipts, you can easily file for a chargeback with your bank if there is any dispute,” Gong said.

7. Accepting whatever APR you’re offered

Wade Schlosser, CEO and founder of debt relief website Solvable, tells his clients that if they’re carrying a balance on their credit cards to call their issuer and negotiate the APRs.

An April 2018 CreditCards.com poll revealed that it’s possible to reduce your APR, increase your credit limit, get reimbursed for a late fee or even get your annual fee waived just by asking your issuer.

“It’s amazing how much money you can save over time if you just shave a few points off your interest rate,” Schlosser said.

8. Not reading your credit card statements

Smith knows that with lots of different bills coming in the mail (or via email) every month, reading each one can be mind-numbingly boring, not to mention time-consuming.

“But there are benefits to reading your credit card statements, like catching unauthorized credit card charges or billing errors,” Smith cautioned.

See related:  Credit card statements: how to read and understand them

9. Accepting promotional credit offers and then forgetting about them

Beverly Darnell is an insurance specialist at USInsuranceAgents who has 20 years of experience in the financial industry as a credit and budgeting advisor, loan counselor, loss mitigation expert and more.

Many card issuers entice consumers with offers of 0% interest for up to 18 months or more, she noted.

So, according to Darnell, because a consumer knows they have, say, 18 months to pay off a debt they might make only the minimum payment each month and plan to deal with the rest later.

Then, 18 months fly by and they haven’t paid off the debt, Darnell said.

And if it’s a retail store card, that consumer may get hit with deferred interest they weren’t paying for 18 months, which can double or even triple the payment amount, she added.

“A smart consumer will take the debt amount and calculate a monthly payment for a much shorter time to ensure they pay off  before the shock of 18 months’ of interest hits,” Darnell said.

For example, if the balance is $1,000 and you have a year interest free, divide that by 12 and make that payment instead of what you see on your statement, she suggested.

10. Not monitoring your credit score and report

Deacon Hayes, owner and founder of the personal finance website Well Kept Wallet, said consumers need to check both their credit scores and credit reports regularly.

“Monitoring both can help you fix any issues that come up from missed bills or fraudulent activity,” Hayes pointed out.

And the sooner you react to credit report errors or other negative items, the faster you can raise a lowered score.

You can check your credit report for free at AnnualCreditReport.com. And many credit cards now offer your free credit score in your online account.

11. Bouncing balances back and forth among cards

Lately, there have been a lot of great balance transfer credit cards with offers of 0% APRs for up to 15 or even 18 months.

Solvable’s Schlosser said it’s a good idea to use one of these cards to consolidate higher interest credit card debt.

“But if someone is applying for a new card every year and just transferring the balance to it, they aren’t paying off their debt — and they’re likely spending a lot of money in balance transfer fees, too,” he said.

In addition, maintaining a high balance on a credit card can lower your FICO score because it increases your utilization rate, which you should keep it as low as you possibly can.

See related:  Credit scores: Is 1% utilization better than 10% or zero?

12. Making a large purchase without a plan to pay it off

Schlosser thinks credit cards can be a big help in an emergency situation.

He acknowledged that using a credit card can get people out of some bad situations, such as an emergency doctor’s visit or an unexpected car repair.

But if you make a large purchase, you should have a plan to pay it off, according to Schlosser.

“I always suggest people look at the tax refund they’re expecting and use at least a portion of that to pay down outstanding credit card debt,” Schlosser said.

So, Schlosser said, if a consumer has a 0% intro APR credit card and decides to use it for their holiday shopping or a winter vacation, that’s fine.

“Make the minimum payments for now, and then pay the balance in full when you get your next windfall,” he suggested.

See related:  Should I get a retail card with a 0% APR deal to make a big purchase?

13. Taking out cash advances

Gerstman Financial Group’s Gertsman is not a fan of credit card cash advances.

“Don’t take cash advances from one credit card to pay off another,” he said. “In fact, cash advances are generally a bad thing under almost all circumstances because they continue the cycle of bad credit habits.”

Further, cash advances are also expensive, as they usually come with high fees and compounded interest rates that kick in as soon as you get the money. Banks don’t offer grace periods on them.

Instead of taking a cash advance, implement a plan to get out of credit card debt sooner than later, Gerstman advised.

See related:  How to minimize the cost of a cash advance