Credit cards can help you improve your credit score and earn rewards. But if you make any of these four mistakes, your credit card could cost you a fortune!

Most people need a credit card. A credit card makes it easy to pay for purchases without having to carry around a lot of cash. Credit cards also allow you to earn rewards for your daily expenses, and can help you improve your credit score and build a positive credit history.

While using a credit card can help you in a number of ways, mistakes with your credit card can be extremely costly. Some mistakes can cause more financial damage than others. So be sure to watch out for these four particularly costly credit card mistakes.

1. Pay only the minimum

One of the biggest and costliest mistakes you can make with your credit cards is charging a balance and paying only the minimum owed instead of paying your card in full. When you only pay the minimum payment on a credit card, you’ll be trapped in debt for months, if not years, and end up paying hundreds, if not thousands of dollars in interest.

Suppose you end up with a $ 5,000 balance on a credit card with an interest rate of 16%. If you make minimum payments equal to the lesser of 2.5% of the balance or $ 25, you will end up paying off your debt over 195 months. It’s been over 16 years. During that time, you’ll pay $ 5,010.05 in interest, which means you’ll double the cost of all the items you’ve purchased to hit that $ 5,000 balance.

You don’t want to find yourself in debt forever, so don’t charge more than you can afford when your statement is due.

2. Make a late payment

When you pay your credit card late, you may be charged a fee of $ 28 the first time and a fee of $ 39 for late payments later. These fees are high enough already, but they are just the tip of the iceberg when it comes to late payment fees.

The biggest financial damage from a late payment comes from the impact on your credit score. According to myFico, if you had a good credit rating before the late payment, your rating could drop by more than 100 points. This drop could have a very real impact on the cost of obtaining your next loan.

Suppose you had a credit score of 750 before your late payment, and your score dropped to 650 because you paid late. If you decide to apply for a $ 300,000 mortgage after your score drops, myFico says you will likely be offered a rate of around 5.105% APR with your new score of 650, which would give you a monthly payment of $ 1,630. The total interest you would pay would be $ 288,718. If you had maintained your score of 750, you would have had an APR of around 4.284% – and a monthly payment of $ 1,482. The total interest you would have paid would have been $ 233,447.

In this case, your late payment would cost you an additional $ 148 per month over the life of the 30-year loan. And the total price for this late payment would be over $ 55,000; that late payment alone would be a very costly mistake.

3. Triggering of Penalty Interest Rates

Did you know that when you pay your credit card balance late, you might get your credit card issuer to increase your interest rate to a penalty interest rate? You can also trigger a penalty rate for violating your cardholder agreement by other means, such as bouncing a check you send to pay off the card or going over your credit limit.

A penalty interest rate could be as high as 29.99%, although some cards charge a lower rate. The penalty rate may apply to your outstanding card balance and may remain in effect on that outstanding balance for up to six months – or longer if you make another mistake while the penalty rate is in effect.

The penalty rate also applies to new purchases, but could apply indefinitely to purchases made after the rate changes – so you could end up paying that higher rate forever.

If your interest rate was 15% before the penalty APR was triggered, you could almost double your interest charges by making this mistake.

4. Make a cash advance

Ultimately, make a cash advance is another costly mistake because the costs associated with getting cash from your credit card are very high.

Many card issuers charge a fee for a cash advance, such as 5% of the amount of cash received, with a minimum of $ 5 or $ 10. The interest rate on a cash advance is also significantly higher than the standard interest rate on a card in most cases. Interest can be charged at this higher rate from the day you purchase the cash advance – with no grace period, unlike other credit card purchases.

Between the upfront fees and the high interest rate, you could end up paying a lot more just to access cash through your credit card. A better approach would be to try and charge for what you need, even if you have to pay for a service like Plastic, which charges a 2.5% fee to allow you to pay almost any bill on a card.

Avoid costly credit card mistakes

Now you know some of the top credit card mistakes to avoid. You can save a fortune by avoiding these mistakes and using your card responsibly. Remember to pay on time, avoid cash advances, and pay off your card balance in full, and you should be in good shape.