Credit Card Mistakes: How & Why They're Made

Credit cards are convenient alternatives to cash and can expand your purchasing power–but used the wrong way, they can also get you into major financial trouble. Discover the credit card mistakes that can drastically drop your credit score.

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Life Situations and Money Habits Impacting Personal Credit

Credit card accounts, loans, lines of credit, and other financial tools can be an essential and practical part of our personal financial management. While there are many advantages to effectively using credit cards, it's important to understand how to avoid some major pitfalls and mistakes.

Responsible use of credit cards expands our purchasing power, provides security in emergency situations, and can help us build a good credit record. This can be crucial when making major purchases like a home or even snagging that great job.

To get a grasp on the issue, we surveyed over 1,000 individuals who use credit cards and gained some valuable insight into the most common credit mistakes. Hopefully, you can use these findings to better manage your credit cards and gain a stronger foothold with future lenders.

Did you know potential employers can check your credit report and spending habits when making hiring decisions? It's true. While they cannot access your credit score or your personal information, they can view limited information such as spending patterns, repayment history, and the type of credit you have.

Credit card use has exploded in recent years, and it doesn't appear to be slowing down any time soon. The Federal Reserve reported at the end of 2017 that credit card payments rose sharply from 2015 to 2016, surpassing growth for other cards. There were 111.1 billion credit card payments in 2016, a 7.4% increase over 2015.

Perhaps unsurprisingly, there was a notable increase in remote use (purchasing merchandise or services online) compared to in-person usage at local retailers.

A 2016 consumer payment study showed that, for the first time in the study's history, consumers used credit cards as their preferred method of payment, outpacing debit cards (which had previously held the top spot).

Maxing Out

Reaching or exceeding the limit (also known as "maxing out") on your credit card is one of the most common mistakes cardholders can make. Almost half of the credit card users we surveyed have maxed out a card, and 16% of millennials expect they'll do so again (compared to 12% of Gen Xers and 10% of baby boomers).

But don't think we're picking on the younger generation because they aren't as financially naive as some might expect.

Most Common Credit Cards Mistakes

Studies show millennials are more debt-conscious than previous generations and have been reluctant to use credit cards, preferring debit cards instead. In fact, only 33% of younger adults aged 18 to 29 own a credit card.

However, as millennials reduce their student loan debt, they are finding that smart use of credit cards has several benefits, including points for free Netflix and music streaming options.

At the end of 2016, Americans had accumulated more than $1 trillion in outstanding credit card debt. The simple reason: Many people spend more than they make. That's why educating yourself on personal finance basics and researching which card is best for you is crucial.

With all this debt, some people are bound to run into trouble. Experts say the "uh-oh" moment typically comes after someone wades into the credit card danger zone rather than before they put down that shiny new plastic card to impress friends at happy hour.

Strategies like paying your balance in full each month, paying on time, and knowing your spending limits can make credit cards a valuable tool as compared to an expensive ball and chain.

Did one of your parents hand you one of their credit cards and remind you to use it only for "emergency purposes?"

Incurring one or more unexpected or emergency expenses is one of the top reasons people say they carry credit cards. Just over 47% said they'd used a card for an emergency, with 37.4% saying it's likely to happen again.

One trap people get lured into is opening accounts they don't necessarily need. Many retail stores use this strategy effectively with their own credit cards. When you open one, you can often get an immediate discount – but you might also get a high APR and a low credit limit, both of which could have negative impacts on your credit score.

Retailers know all too well that the more people who possess their cards, the more those people will spend, and the more interest income retailers and banks will make. Slightly over 32% of our respondents said they fell for this ruse and opened up store cards when they didn't need to.

High Score, Low Debt or Low Score, High Debt

Similar to how your college entrance exams may have impacted the amount of tuition you or your parents paid, the higher your credit score, the more money you can borrow.

In other words, people with a higher credit score – say 720 or better – tend to have lower debt. Additionally, they are more likely to be approved when or if they need additional credit.

Impact Of Credit Mistakes - Average Credit Score and Credit Card Debt of People Who've Made Credit Mistakes

Credit scores typically range from 300 to 850. While the ranges vary slightly, scores above 700 are considered good; only about 20% of Americans fall into the highest tier of credit scores above the 780 mark. This kind of score could open up a world of financial opportunities: larger loans, lower APR, and higher lines of credit.

The number of credit cards someone has is just one of the determining factors in a credit score. For example, an inquiry is run on your credit score each time you apply for a card, which could lower your score. Sometimes consumers recognize they have too many credit cards and decide to close one, especially if they haven't used it in a while or at all. Respondents who say they've done this have an average credit score of 723 with roughly $5,131 in debt.

In years past, consumers could be penalized for closing credit card accounts, even if they were in good standing. However, new changes enacted by the three major credit bureaus (Experian, TransUnion, and Equifax) now place a higher value on lowering your debt versus just making timely payments on large amounts of debt.

Have you ever paid your IRS taxes with a credit card? Like most retailers, the federal government is more than willing to accept hard-earned dollars via plastic. If doing so earns extra airline miles and the entire balance can be paid off immediately, then it could be a smart move.

However, we don't advise you to pay your IRS tab with credit cards. Not only could your credit score take a hit, but you'll also end up with some high processing fees. Those who confessed to doing so had an average credit score of 697 and roughly $8,298 of debt – the highest of any respondents.

So remember, maxing out cards, applying for several cards in a short period of time, or being sued by a creditor for nonpayment can lower your score, making it more difficult to obtain credit or take advantage of lower annual percentage rates.

Poor Decisions Often Mean Higher Debt

When it comes to modeling your spending to keep pace with a co-worker's latest fashion purchase or new car, you may have heard your parents or grandparents use a saying about "keeping up with the Joneses" (which means spending money you may not have to match the purchases and possessions of others).

The phrase was believed to originate when wealthy New York socialite Elizabeth Schermerhorn Jones built an extravagant, 7,690-square-foot mansion in the 1850s. It spurred a building boom by friends and neighbors to match, or "keep up with," the Jones family.

Contributing Factors - Lifestyle Situations Contributing to Credit Card Debt By Average Debt Balance

Unfortunately, and according to a survey conducted by the Federal Reserve in 2016, around 46% of of Americans said they didn't have even an extra $400 to cover an emergency expense or expenses beyond their control. Such expenses as an extended hospital stay, a major car repair or an unexpected home mechanical failure also fall into this category.

That's probably why 32.2% of our respondents referenced similar "unexpected" expenses as a reason for an above average credit card debt of $6,672.

Those pesky, unwanted costs are where we find differences between genders too, with 41.2% of women citing this as why they went into credit card debt compared to 22.4% of men.

However, one of the largest issues for men can be traced to their college days, as 12.1% pointed to irresponsible spending as a major culprit of debt. Even more surprising is 7% of men said spending too much on alcohol was an issue. Some lessons learned at the fraternity key party or cross-country trip to cher on your school in a bowl game can prove quite costly down the road.

Then there's the culprit of keeping up with our fashionable neighbors, the Joneses. Remember them; the ones who have most of the material possessions you don't?

Our survey discovered that slightly over 25% blamed discretionary, or unnecessary, spending on items like designer clothes or upscale restaurants as a contributing factor of a high credit card balance of just over $6,500.

Interestingly, only 4.7% of people said purchasing a home was a major reason for their credit card debt. But remember, mortgage lenders usually require at least "good" or better credit scores before offering loans. Still, anyone who has purchased a home knows there are tons of household items needing to be purchased, which is likely why this category had the highest credit card balance average: $8,088.

Age Matters When Getting Your First Card

Were you under 18 when you obtained your first credit card?

For some teenagers, getting that first card probably seemed like a rite of passage into the adult world of finance. In fact, we found those who received their first card before they turned 18 now had an average debt of about $5,800.

Average Credit Card Debt By Age of First Credit Card

Nearly 74% of survey respondents received their first credit card between the ages of 18 and 22, when most would have been college undergraduates or maybe serving in the military. This group averaged just over $5,200 in debt.

From a marketing perspective, there's a simple reason why 3 out of 4 college-aged adults obtain credit cards.

In years past, credit card companies often targeted college students to open new accounts by offering T-shirts, frisbees, and other items at tables set up near or in a campus university center, dorm complex, or another area where foot traffic was high.

The strategy was entirely logical. Having a college education typically leads to increased earning power and, like any consumer brand, credit card companies and banks want to begin the process of building lifetime loyalty.

However, much of that activity ended when Congress enacted the CARD Act in 2009. It stopped companies from giving away token incentive items but did not specifically prohibit them from marketing to students.

Now, companies must verify income of anyone under 21 and, if they can't, a co-signer is required. According to our survey results, only 3.3% people we surveyed had ever co-signed for someone else's credit card. Those who have not should proceed with caution: Co-signing a loan for someone could bring your credit score down. If things go south with the person you co-signed with, it's hard to escape responsibility: Nine in 10 people who try to get out of a co-signed loan are rejected.

Growing Up With No Security Blanket

What was the financial situation in your household when you were growing up? Did you ever worry if your family had enough money in the bank, or did they keep their financial shortages well-hidden? Whether money was openly discussed or a majorly taboo topic, the way finances were handled in someone's childhood can make a difference in their current credit situation.

Starting On Solid Or Shaky Ground

According to our survey results, those who grew up feeling insecure about their financial situation tended to have lower credit scores than those who felt secure.

Individuals raised with a sense of financial insecurity reported that their current credit scores were 30 points lower on average than those who grew up feeling secure.

This difference wasn't limited to people's current credit scores, though. People who felt financially insecure while growing up reported that even the highest their credit score had ever been was still lower than those who grew up with a feeling of security. Lastly, those who felt insecure said the lowest their credit scores had ever been was 50 points lower on average than those who felt secure growing up.

Childhood Challenges Might Equal Future Challenges

Do the challenges your parents and relatives faced during your childhood permanently impact your future financial success? Not necessarily, but they could.

Fueling Factors - Lifestyle Situations Contributing to Credit Card Debt

Your parents' income or your socioeconomic standing in your childhood does not always limit future opportunities, but it can impact your financial situation in the present. For example, some studies have demonstrated that the higher your parent's income, the higher your SAT scores.

While not every college or university requires an SAT score as part of their admission requirements, additional studies also show the higher one's SAT scores, the lower amount of debt they have and the higher income they are likely to earn.

Digging into our results, we did find differences between the causes of credit card debt for those who grew up with different levels of financial security. Approximately 38% of those raised with insecurities about their financial situation blamed their current credit card debt on unexpected expenses such as medical emergencies or car repairs. By comparison, 30.2% of those who grew up feeling secure said unexpected expenses led to their credit card debt.

Poor money management was another leading cause of credit card debt for about 30% of respondents who felt financially insecure in their childhood, and just under 26% said spending on food led them into debt.

Those who grew up feeling secure in their financial situation weren't spared from credit card debt, however. These folks were more likely to say that discretionary spending and travel added to their debt woes.

The Good, the Bad, and the Never

Do you recall your mom or dad reminding you to brush your teeth, take out the trash, or pay your bills on time? Chances are you heard the first two constantly, but the latter would have been excellent advice too!

Good And Bad Credit Habits

That's because people who never skip their credit card payments average a credit score 137 points higher than those in the habit of making late payments or, in some cases, no payments.

Using a baseball analogy, it's like comparing an all-star slugger batting .400 to someone hitting .267. The first gets offered more money when their contract expires; the other probably doesn't. One gets offered a low prime rate mortgage loan; the other, a higher subprime rate with lots of added points.

There's also much to be said for "doing your homework" and paying attention to details.

That's because our survey participants who kept close tabs on their finances by reviewing and organizing them on a weekly basis added another 41 points to their credit scores, compared to those that sifted through a shoebox full of receipts once a year when tax time rolled around.

We discovered similar results (a 73-point difference) with those who reviewed credit card statements for fraud weekly versus those who only checked once per year.

When it comes to your credit score, it could really pay off to know where your money is going – and it only takes a few minutes to review your statements each week.

It's Never Too Late to Improve Your Credit

There's no doubt that achieving and maintaining a high credit score should be part of your financial strategy. It can save you money through lower interest rates and fees, not only on your credit cards but also on mortgages, auto loans, and personal lines of credit.

While we focused on many of the credit mistakes people make in this article, it's never too late to "turn over a new leaf" and begin the process of repairing or restoring your credit history.

Simple steps like sitting down with a trusted financial professional to review where you are now and where to go next can get you headed in the right direction. Other ideas, such as establishing an emergency fund for unexpected and costly expenses or developing a strategy to reduce your overall debt burden, can help you acquire solid financial footing.


For this study, we surveyed 1,010 credit card users through Amazon's Mechanical Turk service. 52.7% were women, 47.2% were men, and less than 1% were nonbinary. Participants ranged in age from 18 to 79 with a mean of 37.2 and a standard deviation of 11.9.

Respondents were asked to report their highest, lowest, and current credit scores. Those who could not remember their credit score were not included in the averages. 15.4% of respondents didn't know their current credit score, 37.5% didn't know their lowest credit score, and 27.1% didn't know their highest credit score.


The data we are presenting rely on self-report. There are many issues with self-reported data. These issues include, but are not limited to: selective memory, telescoping, attribution, and exaggeration.

We did not have a validated measure to determine how financially secure participants felt during their upbringing, so we created our own. Participants were asked the following question: Growing up, how financially secure did you feel? Answer options were presented on a seven-point scale with 1 being "extremely insecure" and 7 being "extremely secure." Responses of 1 to 3 and 5 to 7 were grouped, and neutral responses of 4 (neither insecure nor secure) weren't included in the visualizations.

Results of this study were not weighted. No statistical testing was performed, so the claims listed above are based on means alone. As such, this content is purely exploratory, and future research should approach this topic in a more rigorous way.


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