The 10 most common credit card mistakes and how to avoid them

For many of us, a credit card is our first entry into the larger financial world. It can help you build credit, earn rewards and cover the cost of larger expenses you don't have cash on hand for.

But cards come with a lot of responsibility. Fail to make timely payments and you can be hit with interest and late fees. You'll also be risking your credit score, which could impact your ability to be approved for a loan, mortgage and other financial products.

Below, CNBC Select breaks down the 10 most common credit card mistakes and how to avoid them.

One of the biggest credit score myths is that carrying a balance on your card improves your credit. In fact, 22% of Americans carried a balance, thinking it would increase their credit score. In reality, carrying a balance causes you to have a higher credit utilization rate, which can lower your score.

A FICO study found that "high achievers" — consumers with an 800 FICO Score — used just 7% of their credit limit on average.

Thanks to interest and late fees, carrying a balance can also get expensive. And while a cash-back card can be a great tool to help you save money on your everyday spending, all that savings is for nothing if you're paying interest.

While you should always make at least the minimum payments, you should do everything you can to pay more. Ideally, you're paying your bill in full each month, or else it's not advised to only pay the minimum due. Not paying your bill in full can add months — even years — to the time it takes you to pay off debt.

Have a payment plan in place before you take on bigger expenses and always make consistent, on-time payments toward your balance.

If you're 30 days past due, a late or missed payment can cause your credit to drop by 17 to 83 points, according to FICO data. Let 90 days lapse and the hit could be as much as 133 points.

Being less than 30 days behind on your payment shouldn't impact your credit score, but you may still incur a late fee or penalty APR.

The easiest way to avoid missing a payment is to set up monthly autopay. If you're not comfortable with that, you can also set calendar reminders and email notifications.

Checking that the transactions listed on your bill are accurate is the best way to take early action against errors or fraud. It can also remind you to cancel streaming services or other subscriptions you put on the card and forgot to cancel.

When you were approved for your credit card, you received a cardmember agreement that listed your annual percentage rate and assorted fees. It probably didn't top your must-read list, but it's important to review it so you know what you're on the hook for.

Here are some key terms to look for and what they mean:

• Annual fee: A yearly charge that many companies assess for just holding the card. It can increase over time, so it's important to know how much you're paying.
• Purchase APR: The annual percentage rate assigned if you carry a balance from month to month. Simply divide by 12 to get the monthly interest rate.
• Balance transfer APR: Often the same as the purchase APR, this interest rate applies to balance transfers.
• Penalty APR: If you make a late payment, you may be hit with a higher rate than your standard APR.
• Late payment fee: If you submit payment late, you may also incur a penalty fee — in many cases it's $30 for a first offense and $40 for subsequent violations made within six billing cycles. Some card issuers waive this fee, especially for first time offenders.
• Foreign transaction fee: Purchases made outside the U.S. often incur a fee, typically 3% per transaction.
• Balance-transfer fee: When you transfer debt, you'll often incur a 3% to 5% fee.

One of the riskiest things to do with your credit card is to take out a cash advance. There's no grace period, so interest starts accruing immediately. You'll likely also incur a cash advance fee, often 5% of the advance amount.

If you need quick cash, a personal loan is likely to have a lower, fixed interest rate.

A number of cards come with introductory 0% APR offers, which pause interest on new purchases or balance transfers (or both) for a set period. It can be a great way to get more time to pay down a balance, but once the intro period ends, you'll be hit with a much higher ongoing APR, which can range from 18% to 30% or more, depending on your creditworthiness.

Review the fine print to know exactly when the intro 0% APR period begins and ends, as well as the terms once the offer ends.

Using all or even a majority of your available credit will cause your credit utilization rate to spike, lowering your credit score. If you find yourself maxing out your card frequently, you may want to look at your budget or ask your card issuer for a limit increase.

Each time you apply for credit, a new inquiry appears on your credit report. The more inquiries you make in a short period of time, the more it can damage your credit score. Try to apply for credit only as needed, ideally no more than once every six months. Take advantage of prequalification forms, which allow you to check whether you would get approved for a card without damaging your credit.

While there's no perfect number of credit cards everyone should have, U.S. consumers have an average of four.

The amount of time you've had credit accounts for about 15% of your FICO Score,. When you close a card, the average length of your credit history drops.

If you've one card for 5 years old and another for 2, the length of your average credit history is 3.5 years. If you close the 5-year-old card, that average drops to 2 years.

It's generally not advised to close a credit card, especially your oldest card. There are exceptions, of course— such as If you're being charged an annual fee that outweighs the card's benefits.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice to help them make informed financial decisions. Every loan review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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