I Asked ChatGPT To Explain Common Credit Card Mistakes — Here’s What To Avoid
-
Written by
Dawn Allcot
-
Edited by
Levi Leidy
-
Reviewed by
Jasmin Baron
Most people have made a credit card mistake or two in their lives. Whether you’re getting started on your financial journey and beginning to build your credit or looking for ways to use credit more wisely, it often helps to get insights from a neutral third party.
It’s not always possible to speak with a financial advisor. But ChatGPT is here for you —carrying the knowledge of the internet in its algorithmic intelligence.
I asked ChatGPT, “What are the most common credit card mistakes people make?” I also asked it to explain it to me like a young adult just getting my financial footing. Here’s what the AI said.
Check Out: Essential Dos and Don’ts for Using Credit Cards Wisely
Read Next: Ways To Elevate Your Summer Travel Adventures
Mistake 1: Only Making the Minimum Payment
“Paying just the minimum keeps you in debt longer and racks up interest,” ChatGPT said.
ChatGPT’s Tip
“Even a small extra payment each month can save you hundreds over time.”
Mistake 2: Missing a Payment
It seems obvious, but missing a payment can be more costly than you might imagine. Not only can it trigger late fees or penalty annual percentage rates (APRs), but it can also damage your credit score, ChatGPT pointed out.
“Just how bad is it to miss a single payment?” I asked.
“A single late payment can hurt more than most people think,” ChatGPT replied. “If your payment is 30 days late or more, it can be reported to the credit bureaus and cause your credit score to drop by 60 to 100 points, depending on your current score and credit history. The hit is often bigger for people with good or excellent credit, because they have more to lose.”
If your payment is 30-plus days late, that black mark can stay on your credit report for up to seven years, ChatGPT added. However, the AI pointed out, “The impact fades over time, especially if you start making on-time payments again.”
ChatGPT’s Tip
“Set up automatic payments or reminders to stay on track,” ChatGPT advised.
Mistake 3: Maxing Out Your Credit Card
It might be tempting to open a new credit card with a high credit limit and max it out to earn rewards. But this is a common mistake, according to ChatGPT.
“Using too much of your available credit (even if you pay it off) can lower your credit score,” it said. “Lenders look at your credit utilization ratio, or how much credit you’re using compared to what’s available. A high ratio makes you look like you’re relying too much on credit.”
Of course, you might need to use your credit card for an emergency purchase and put the card close to its limit. If this happens, try to pay it down as quickly as possible.
ChatGPT’s Tip
“As a rule of thumb, try to keep your balance below 30% of your limit,” ChatGPT said. “If your limit is $1,000, aim to stay under $300. If you can keep it under 10%, that’s even better for your score.”
Mistake 4: Opening Too Many Cards Too Quickly
If you’ve worked hard to raise your credit score and now you qualify for top-tier rewards credit cards, you may want to apply for several cards to take advantage of all the credit card perks.
But ChatGPT advised against this move. “Every time you apply for a new card, your credit score can dip a little. Opening too many accounts at once can also look risky to lenders — and be tough to manage,” it said.
Diving deeper, the AI explained, “Every time you apply for a card, it creates a hard inquiry on your credit report, which can lower your score a little. Too many new accounts in a short time can also signal risk to lenders.”
Managing multiple cards also means more due dates and bills to remember, and more chances to miss a payment, it said.
ChatGPT’s Tip
Choose one or two credit cards with the best rewards that match your spending habits. Again, set up automatic payments or reminders so you never miss a due date.
Mistake 5: Not Understanding the Terms
“A lot of people sign up for cards without reading the fine print — things like interest rates, fees or how rewards work,” ChatGPT said. “Some cards have high interest rates, annual fees or introductory offers that expire after a few months. Others have penalty APRs if you miss a payment. Rewards programs can sound great, but may come with limits or blackout dates.”
ChatGPT’s Tip
“Knowing the details can help you avoid surprise charges and make smarter choices,” the AI said. “Taking a few minutes to read the terms — especially the APR, fees and how interest is charged — can help you avoid expensive surprises. It also helps you choose a card that actually fits your lifestyle.”
More From CardCritics™
