You might assume that personal finance writers have never struggled with money a day in their lives — but you’d be wrong. In fact, many of us are better writers thanks to our experiences with money missteps.
I haven’t always had the healthy relationship with credit cards I have now, and I’ve spent the last couple of years getting better at using them for my benefit.
Here are three costly credit card mistakes I’ve made that you can avoid.
1. Carrying a balance
This was the costliest credit card mistake I made. I earned low wages and lived paycheck to paycheck for the entirety of my adult life until very recently, and when you don’t have emergency savings, credit cards can be a handy way to cover unplanned bills, like a car repair.
Unfortunately, credit cards charge interest — a lot of it. As of May 2024, the average rate on credit card accounts assessed interest was 22.76%.
I carried credit card balances for years, and I always paid more per month than the minimum required payment. But it wasn’t enough to keep my balances from inching upward — and keep me from paying a ton in interest.
It took me changing careers and then taking on a side hustle to boost my income enough to snowball my debt payoff and get a fresh start with $0 balances across all my cards.
How I avoid this mistake now: These days, I put most of my regular spending on credit cards to benefit from cash back and rewards (more on that below). But I pay off my balances every month, unless I am using a 0% intro APR offer to pay off a large purchase over time. I hope to never pay a dollar in credit card interest again, if I can help it — and I also have an emergency fund now.
2. Paying foreign transaction fees
If you never travel outside the United States, you might be unfamiliar with foreign transaction fees. I recently advised someone I know about which of his credit cards would be best to use ahead of his first trip across the border to Canada — it didn’t occur to him that he might have to pay 3% on top of purchases made in a foreign currency. (Thankfully, he already had a card that doesn’t charge these fees.)
It is an unfortunate fact that during the period of my life where I was spending time in Canada every week, I wasn’t at all fussed about which credit cards I used on my trips. I did have a travel credit card (these usually don’t charge extra for foreign transactions), but I wasn’t strict about using it every time, and as a result, I paid that 3% extra on multiple occasions. (At least the exchange rate is favorable for U.S. dollars.)
How I avoid this mistake now: My travels in 2023 and 2024 have taken me to Canada a handful of times, and I’ve also been across the Atlantic to the U.K. On all of these trips, I’ve used one of the best travel credit cards to save me money on foreign transaction fees as well as earn points on travel expenses like hotel stays, flights, and dining out.
If your own travel plans will require a passport, do your budget a favor and get a card that won’t charge you more for purchases you make outside the U.S.
3. Not matching cards to my spending
As I mentioned above, I never used to spend much time thinking about how to maximize the rewards offered by credit cards. I tended more to view them as an easy and secure way to pay for purchases (and they certainly are).
As a result, I usually didn’t go out of my way to use the right card in the right situation — I’d happily use a card that only earned 1% or 2% at the grocery store, blissfully unaware that I was missing the chance to earn much more.
How I avoid this mistake now: Groceries are a huge part of my budget — after my mortgage and my health insurance premium, they’re my third-biggest spending category. So after I paid off all my outstanding debt and boosted my credit score in 2022, the first card I opened in my new era of credit card usage is one that pays the highest rate of cash back at grocery stores. I love redeeming it as a statement credit every month — it directly makes my grocery bills cheaper.
Credit cards come with a learning curve
I’m lucky to have found a writing and editing home here at The Ascent, and I’ve had many opportunities to learn how to manage my money better and avoid costly mistakes like the ones above.
If you’ve ever carried a credit card balance, paid a foreign transaction fee, or accepted a low rewards rate because you didn’t match a card to your purchases, it’s OK. No one is born knowing how to use credit cards to improve their financial situation — and we’re surrounded by examples of expensive credit card misuse.
As for me, I’m going to keep making sure I pay down my balances every month, pick the right cards for international travel, and open cards that pay bonus rewards on the categories where I spend the most money. You can do the same — and ensure you’re benefiting from credit cards, rather than letting credit card companies get rich off you.