You can avoid many credit card costs by using your credit card responsibly. Here are 9 slip-ups that can increase the amount you pay for the convenience of using a credit card.

1. Paying credit card bills late.

When you use your credit card, you agree to pay your minimum payment by the due date. If you’re late on your credit card payment, there are some costly consequences. You’ll get charged a late fee that could be as much as $39 in some cases. Then, your interest rate could increase, which would also increase your minimum payment. If you’re in the habit of paying the minimum on your credit card, the late payment fee could make it hard to get caught up on payments.

2. Going over your credit limit.

Your credit limit is the maximum amount you can charge on your credit card without being charged a penalty. If you go over your credit limit, you’ll be charged an over-the-limit fee. Just like with late payments, your interest rate could increase if you exceed your credit limit. The over-the-limit fee will make your minimum payment go up. If you don’t pay the late fee plus your regular minimum payment, you’ll be charged a late fee.

3. Misunderstanding balance transfer deals.

A six-month zero percent interest balance transfer offer is a good deal, if you can pay off the balance within six months. However, once the offer expires, you’ll be subject to a much higher interest rate. The interest rate could be so high that you negate all the interest you saved during the no-interest period. Before you do a balance transfer, make sure you understand the terms of the promotion. Check your budget to see whether you can afford to pay off the balance within the promotional period. If you can’t, it could be cheaper to leave your balance where it is.

4. Taking out a cash advance.

Cash advances are much more expensive than purchases of the same amount. That’s because cash advances have a fee and a higher interest rate. Not only that, interest begins accruing on a cash advance the day you make the withdrawal. So, you don’t get a grace period to pay off the balance and avoid a finance charge. Since cash advances have higher interest rates, you’ll face higher finance charges on the balance.

5. Failing to report unauthorized credit card charges immediately.

When your credit card is lost or stolen, it’s important to report the missing credit card as soon as you notice the theft. If you notice fraudulent activity on your account, let your credit card issuer know as soon as possible. If you wait more than 60 days to report credit card fraud, you could be liable for some of the charges.

6. Paying only the minimum.

Making minimum only payments is always more expensive than paying off your credit card balance quickly. The longer it takes you to pay off your credit card balance, the more you’ll pay in finance charges. If all you pay is the minimum, you could end up paying double the amount of finance charges than the amount you originally charged.

7. Making purchases just to get more rewards.

Reward credit cards can be very beneficial, when you can afford to pay off the balance at the end of every month. Abusing reward credit cards just to accumulate rewards is risky because you pay not be able to repay the balance. Plus, reward credit cards tend to have higher interest rates, so if you don’t pay off your balance quickly, you could end up paying more in interest than you received in reward benefits.

8. Failing to read your credit card mail.

Credit card issuers are required to send advance notification of certain credit card changes, like an increase in your interest rate. If you have a tendency to throw away unmarked mail or even your billing statement inserts, you could miss an important announcement about your credit card. These disclosures keep you from going over your credit limit, making purchases on a high interest rate credit card, or from trying to use a credit card that’s been closed.

9. Adding authorized users to your account.

When you add an authorized user to your credit card, that person is allowed to make charges on the credit card, but isn’t required to make payments. Instead, you, as the primary account holder, are responsible for paying all charges made on the credit card. So, if your authorized user maxes out the credit card and incurs an over-the-limit charge, it’s your responsibility. You have to decide whether that’s a risk you’re willing to accept.

Credit card companies want you to pay more credit card fees because it makes them richer. If you want to avoid paying steep fees for your credit card, pay attention to the terms and conditions of your credit card and avoid these costly credit card slip-ups.

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What is a Credit History?

Your credit history is a record of how you’ve paid your credit cards, loans, and other bills. Your credit history is collected in your credit report and measured with your credit score. Most of your credit cards and loans will automatically be included on your credit report. Other bills like utility payments aren’t included in your credit report, but can be added if you become seriously delinquent and the account is sent to a collection agency.

How to Build a Good Credit History

You’re in control of your credit history. How you borrow and repay money will determine whether you have a good or bad credit history. Here are some things you should do to build a good credit history.

Open a Credit Card

To start building a good credit history, you need some type of credit account that you can use to start showing you know how to handle credit responsibly. If you’ve never had a credit card, start with the bank where you have a checking or savings account. You might also ask a parent to add you as an authorized user to one of their credit card accounts. Only be added to an account that is in good standing.

Retail stores are known to give credit cards to consumers who are just beginning to build a credit history, so you may start there if you can’t get a bank credit card.

A secured credit card is a final option. This is a credit card that requires you to pay a deposit to secure the credit limit for the credit card. A secured credit card is a good option if you’re just starting out with credit and can’t get any other credit card.

Note: Starting February 22, 2010, if you are under 21, you must show that you have income to pay your credit card bill or have a co-signer to get a credit card.

Pay Your Bills on Time

How you pay your bills has a significant impact on your credit history. Your credit score – the numeric version of your credit history – is mostly made up of your payment history. Late credit card and loan payments are included on your credit report for seven years. They will have a less significant impact as they get older, but potential creditors and lenders will still be able to see that you were once late on your credit card payments.

Late payments lead to some of the worst credit report listings – foreclosure, repossession, and student loan default. It often takes months of missed payments for any of these to happen, but once any of these is on your credit report, it can devastate your credit score.

Keep Credit Card Balances Low

The second most important part of your credit history is the amount of debt you carry. Lenders want to see that your credit card balances are low enough for you to pay off without trouble. So, as your credit card balances rise above 10% to 20% of your credit limit, it looks bad for your credit score.

Instead of charging high balances on your credit cards, keep your balances low (between 10% and 20% of your credit limit) to help build a good credit history.

Have Both Credit Cards and Loans

Showing that you have experience with different types of credit accounts will help you build a good credit history. Rather than having only credit cards or only loans, try to have some of both. Avoid opening accounts simply to try to get credit score points in this area. Instead, open accounts as you need them. For example, take out a loan when you prepare for college or a mortgage loan when you’re ready to purchase a house.

Apply for Credit Only When You Need It

A sign of creditworthiness is that you’re not taking on more credit than you can handle. One of the ways you demonstrate this is by keeping your credit card applications to a minimum. Each time you apply for a new credit card or loan, the bank has to check your credit report. These credit report inquiries affect your credit score for 12 months and stay on your credit report for 24 months. Within that period of time, only apply for one or two credit cards or loans to build a good credit history.

Leave Your Credit Cards Open

You need credit cards to help build your credit history. It’s rare that closing a credit card will do anything to build your credit history. Instead, it’s more common that a closed credit card will hurt your credit score, especially if you still have a balance on the credit card when you close it.

Slow and Steady Wins the Race

A good credit history won’t happen overnight. Instead, it takes years to build a solid credit history, so don’t rush. Use your credit card responsibly and the good credit history will come.

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1. Pay the balance in full.

If you pay off your balance completely every month, you avoid the finance charges that can make having a credit card unnecessarily expensive. Not only that, if you keep a $0 balance, you eliminate the risk of running into credit card debt. Keeping your credit card purchases at an affordable level will make it easier to pay your balance in full each month.

2. Make your credit card payments on time.

Three things happen when you make a late credit card payment. First, you get charged a late fee. Depending on your card issuer and your credit card balance, your late fee can be as much as $39. Second, your credit card interest rate could increase. Starting February 22, 2010, you won’t get an interest rate increase for a 30-day late payment, but you will for a 60-day late payment. Finally, a late payment added to your credit report and remains there for seven years.  Late payments hurt your credit score and you ability to get credit cards and loan in the future.

3. Don’t charge a high balance.

There are two things wrong with running up a high credit card balance. First, it hurts your credit score because 30% of your credit score considers how much of your available credit is being used. A bad credit card leads to higher interest rates and even having some credit-based applications denied.

The second reason you shouldn’t have a high credit card balance is because it’s more difficult to repay. When you keep your balances low, it’s easier to pay them off, leaving you with no debt to worry about.

4. Don’t loan it.

Family and friends might ask to borrow your credit card and the best answer is “No.” Whenever your credit card leaves your possession, you have no control over what happens to it. The person borrowing your credit card could rack up a high credit card balance. Or, they may not be as careful with your credit card as you would be and it can be lost or stolen.

5. Use it or lose it.

If you want to keep your credit card, use it from time to time. One credit card issuer has been known to charge an inactivity fee when you don’t use your credit card within a certain period of time. That’s actually nicer than what most other credit card issuers do, which is close your credit card account. To you’re your credit card open, charge something on it periodically and repay the balance when the statement comes.

6. Keep it in a safe place.

Unfortunately, there are people out there who would love to get their hands on your credit card. Even your credit card number would be a credit card thief’s dream-come-true. Keep your credit card in a safe place where it can’t be stolen easily. When you’re out in public, don’t leave it out in the open, because a thief even take a picture of your card or even memorize your credit card number.

7. Monitor your billing statement and inserts.

Make sure you read your credit card billing statements completely and report any suspicious activity to your credit card company. Since credit card companies include important announcements with your billing statement, it’s important that you read everything in the envelope with your billing statement.

8. Leave it open.

When it comes to your credit score, there’s nothing to be gained by closing a credit card account, especially one that still has a balance. In fact, closing a credit card is more likely to hurt your credit score than to help it.

If you want to reject your credit card issuer’s changes to your credit card terms, you may have to suffer through a temporary blow to your credit score. That’s because you have to close your credit card account to reject the change in terms. Fortunately, your credit score will recover as you pay off your credit card balance.

9. Let your kids see you pay the bill.

Children can easily believe credit cards are magic money since they never see what goes on behind the scenes. When your child is old enough to understand, let him or her watch you pay your credit card bill. Explain that the payment you’re sending to the credit card company comes from your paycheck and takes away from the money you have to spend on other things. You may use cash to help explain what’s going on.

Using your credit card the right way lowers the overall cost of using a credit card. It builds your credit score and keeps you out of credit card debt. There are better reasons than those to use your credit card the smart way.

Related posts:

1. 10 Ways to Avoid Credit Card Fraud
2. 10 Ways to Avoid Credit Card Debt