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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How Credit Card Charge-offs Happen

Late payment entries on your credit report progress in 30-day increments. So, one late payment is 30-days late; two late payments are 60-days late. Once your credit card reaches 180 days late, you’ve missed six credit card payments.

As long as your account is current, credit card companies consider your balance to be an asset to the company. However, when you reach 180 days late, your debt is now considered a liability for your credit card issuer. As an accounting practice, the credit card company writes off your debt on their books and calls it a charge-off.

The charge-off listing is added to your credit report, letting future creditors and lenders know your debt got so late the credit card company had to write it off.

A charge-off is one of the worst things that can appear on your credit report. It will devastate your credit score and can take years to repay.

You Must Pay a Charge-Off

Even though the word “charge-off” sounds like you’ve been forgiven for the debt, that’s not the case. You owe a credit card charge-off just like you owe your current credit card balances. Once your account has been charged-off though, your credit card company may not spend anymore time trying to get you to pay the debt. Instead it will hire a third-party debt collector to work on getting you to pay.

Charge-Off Listings Affect Your Credit Report and Credit Score

A charge-off will remain on your credit report for seven years and 180 days from the time your account first went delinquent. Even if you pay off the charge-off, your credit report will still reflect the fact that your account was once charged-off. The only thing that makes it better is that it becomes a Paid charge-off rather than an unpaid one.

It is difficult to get a charge-off removed from your credit report. You may be able to negotiate with the credit card company to remove the charge-off listing in exchange for payment. But, the credit card company has little incentive to agree to this. Not only that, credit card companies have an agreement with the credit bureaus to provide accurate information about your accounts.

The glimmer of hope is that some consumers have been able to work with their credit card issuers to remove the charge-off if they paid the account. It’s a matter of talking to the right person at the right time.

Settling Charged-Off Credit Card

If you can’t convince the creditor to remove the charge-off, consider negotiating a lower payment amount. This is called “settling your debt.” When you settle a credit card account, your creditor agrees to accept a lower payment to satisfy the debt. From the credit card company’s perspective, something is better than nothing. For you, it means you part with less money than you actually owe.

Be careful about settling a credit card charge-off. Your credit card issuer is required to let the IRS know about any debt above $600 that’s cancelled. In turn, you’re required to report the cancelled debt as income on your next tax return. That could mean you owe taxes or receive a lower refund than you would have otherwise.

If you settle a charge-off, your credit report will be updated to show the account was settled rather than paid in full. This could hurt your credit score as long as it appears on your credit report. Fortunately, the negative entry will fall off after seven years from the date the account was charged off.

Benefits of Paying as Charge-Off

Whether you pay a charge-off in full or you settle the account, you shouldn’t leave the charge-off unpaid. If you don’t pay a charge-off, it can impact your ability to get credit cards and loans in the future. That means you’ll have difficulty purchasing a house or a car. Not only that, you could pay higher insurance rates, be turned down for a job or promotion, and you could even have difficulty renting an apartment.

Once the charge-off is paid, collection efforts on the account will stop. You don’t have to worry about getting calls and letters from debt collectors.

How to Avoid a Credit Card Charge-Off

You can avoid a charge-off by making at least the minimum payment on your credit card each month. Make sure you let your credit card issuer know your current mailing address so you receive your billing statements in time to make your payment. Or, if your credit card issuer has the option, you can sign up for paperless billing.

If you notice you have trouble making your credit card payments, contact your credit card issuer ahead of time. Your card issuer may offer a hardship program that lowers your interest rate or monthly payments to make your payments more affordable. Or, you may take advantage of consumer credit counseling which will help you negotiate a lower interest rate or minimum payment if your card issuer doesn’t have a hardship program.

Avoid using cash advances, balance transfers, and payday loans to pay your credit card bills because create more credit card problems than the charge-off itself.

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