8 Potential Pitfalls of Credit Cards

When choosing or using a credit card, read the fine print and avoid cash advances.

Advances in technology help card companies notice irregularities first
By SHARE

[Read: How to Stop Grey Charges.]

Review other materials from your credit card issuer and continue checking the fine print even after you start using your new plastic, as interest rates and terms can change. It's probably not the most tantalizing mail you get, but Harzog recommends reading all email and snail mail from your credit company so you'll know about any changes.

6. Maxing out your cards. Using all your available credit not only costs you money, it can also lower your credit score because credit card issuers consider you a higher risk if your credit utilization ratio – the amount you've charged versus your total available credit – is above 30 percent. "You start to look like you're desperate, like you need the credit card to survive," Harzog explains. "Credit card issuers don't like risk." As a result, they may raise your interest rate, or they may try to reduce your available credit to rein in your spending.

7. Missing your due date. A credit card's grace period is the time between the end of a billing cycle and your payment due date. Miss the due date, and you may get charged interest or damage your credit score. "The due date really is the due date," Harzog says. "Set up something to remind yourself that payment is due on that day." This could be a calendar reminder or if you have multiple credit cards, you could ask the issuers to shift your billing cycle so the due dates are synchronized.

Arnold recommends automating credit card payments so you won't get foiled by a lost check or forgotten payment. "If you pay by mail, you can forget or go on vacation," he says. "Set your whole thing up on autopilot as much as possible."

[See: 10 Saving Strategies That Can Backfire.]

8. Chasing points or miles. Credit card rewards can be addictive and cause some people to buy things they don't need simply to get the rewards. "The key to the rewards card is to use it to purchase things that you already need to buy," Harzog says. "If you need a new outfit, that's fine, but don't use a rewards card to buy a new outfit because you want the points." Plus, in order to receive a $500 plane ticket, you would need to charge several times that amount to earn the equivalent in miles or points.

Studies show that consumers spend more when paying with credit versus cash, and rewards card users spend even more than those with a regular card. "Rewards cards are designed to get you to spend more, and so they can be very enticing," Arnold says. "You've got to be very disciplined."